Application for Cashback Arithmetic
The credit card offers two percent cashback. The person has spent six months believing this is significant. The annual statement has arrived.
Annual Review: Cashback Arithmetic, Fiscal Year Assessment
Prepared for the account holder's consideration
Executive Summary
The account holder selected this credit card twelve months ago on the basis of its cashback structure. The card offers two percent cashback on all eligible purchases. The account holder has used this card for the majority of their discretionary spending over the review period, and for several recurring subscriptions. The annual review is now available.
The total cashback earned in the prior twelve months was forty-three dollars and eighteen cents, or approximately one dinner at a mid-range restaurant, before tip.
Category Analysis
Two percent of a transaction feels meaningful at the moment of the transaction. It does not feel meaningful as a concept. It is a small percentage of a small number, and the result of multiplying a small percentage by a small number is a smaller number, and the smaller number is forty-three dollars and eighteen cents.
The largest single-month cashback period was November, during which the account holder made several larger purchases and earned eleven dollars and forty cents. This felt like a good month. The account holder noted it at the time.
Observable Consequences
The first consequence is perceptual. The account holder made purchasing decisions over the course of the year with an ambient awareness that they were "earning cashback." This awareness produced a feeling of mild financial prudence that accompanied each transaction. The feeling was accurate in the sense that cashback was being earned. The feeling overstated the magnitude of the cashback being earned.
The second consequence is comparative. The account holder's grocery store also offers a loyalty program with points. The points convert to store credit at an equivalent rate. The account holder is not enrolled in this program because enrolling required filling out a form approximately eighteen months ago, and they did not fill out the form. The store credit they did not earn is comparable in size to the cashback they did earn.
The third consequence is behavioral. The account holder will continue to use this credit card because the cashback, while small, is larger than zero, and switching to a different card requires research that has been in a browser tab for approximately three weeks without being read.
The Absurd Rule
Cashback rewards are structured such that the total earned is always legible in annual terms and always disappointing in annual terms, simultaneously. The disappointment is not a bug. It is the designed experience of receiving a small reward that is large enough to retain the customer and small enough to require no significant program expenditure.
The customer is aware of this. The customer renewed the card.
Recommendation
The forty-three dollars and eighteen cents will be applied as a statement credit. The account holder will see this reflected as a line item and will feel, briefly, that the year was worth it. This feeling will last approximately as long as it takes to pay the November bill.