And what is the difference between cashback for credit vs debit cards?
Edit: I believe I mean cashback rewards
In: 0
It might be confusing because terms are awkward.
There’s one form where you use a debit card, buy something for $19, pay $39, and get $20 back as “cash back”. This is sort of like bundling a purchase with an ATM visit, let’s ignore this because that’s not what you’re asking about.
You know how bulk purchasing makes things cheaper? Like the difference between buying 1 banana from a grocery store vs. buying 400 bananas as Sam’s Club gets your a lower per-banana cost? In this case, the bulk buyer isn’t you, it’s the bank/credit company.
They make a deal with the store and say if you let people use our credit/debit cards, we’ll pay you 95 cents for every dollar the custom spends. There are various reasons why a store might take this deal, but let’s agree they’ll accept it.
The credit card company or the bank will pay the store 95 cents per dollar, then charge you the full dollar, and pocket the 5 cents difference and that’s how they make money.
But the credit card or bank wants you to use *their* card to make the purchase and not Bank X’s card, or credit company Y’s card. So they say, fuck it, we’ll give you back 2 cents, we’ll pocket 3 cents, and we both make out so that’s nice right?
That’s basically the deal, they are negotiating a lower “bulk” rate from the store, and instead of pocketing it, offering you a portion of it as “cash back” as an incentive for you use their card and not someone else’s.
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