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
In a cash back, instead of a point system, you earn credit with every purchase. Sometimes more on some items than others. Say you get 2% cash back on groceries, and %3 cash back on entertainment. If you buy $100 worth of groceries, they’ll put $2 in your cash back rewards. Then you spend $100 on a restaurant, they give you $3 in your cash back rewards. Now you have $5 in rewards. So you borrowed $200, but only have to pay back $195 if you want.
You can choose if they give you the money, or if they apply it to your balance, or it can be used towards a purchase sometimes – for instance, I can fully or partially pay using that balance at some vendors with my credit card rewards.
It’s basically a bribe to get you to use your credit card to pay for everything, since they make money on each transaction. It’s advantageous to you if you pay off that bill every month.
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