Like when a card says it offers a percentage of cash back
Wth does that even mean? If I borrow 200$, then I pay back 200$ or more, so what is cash back?
In: 5
The customers of credit card companies are not the cardholders like you and me. The customers are the businesses you buy things at. It’s why certain businesses may take some kinds of cards but not others, or none at all. The ability to swipe a card at a store is a service that the stores have to pay for.
From the credit card company’s perspective, they have a service that they need to sell to stores. To be attractive to stores, they need their service to be worth it. They do this by trying to create as many regular users of their cards as possible. If they have a lot of users, the card company can roll up to stores and say, “Wow, look at all these people who want to pay for things with our cards, it’d be a shame if they didn’t want to shop at your store because they couldn’t swipe them here…”
To entice you to use their cards and prop up their numbers, the credit card company will shower you in loyalty gifts. This often takes the form of cash back, where the credit card company essentially is paying you to use their card to buy things. For every dollar you spend, they will pay X% of that purchase back to you.
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