Why not? Because the money you're saving is actually money you're paying anyway. Although it seems free to you, merchants have to pay a rate to the plastic-processing companies to accept your card. Usually between 3% and 10% of the purchase price, depending on various factors. And when merchant costs go up, the cost of the product they're selling goes up. So prices today, in the age of plastic, are inflated slightly more than they would otherwise be. Your reward points are just the card company sharing some of its gains with you, to encourage you to push their product. So here we have a tragedy of the commons - Individuals are better off defecting, so that they can partake in the rewards. But society in general is worse off as individuals defect, because now goods cost more than they otherwise would. Cheers!
Why is it that cash discounts rarely exist? A big reason is that (wait for it...) many businesses don't mind accepting credit cards at 2-3%. I know you'll find it hard to believe but it's true. They like the ease of pay and in many industries they get paid much more quickly than they would with ACH. Many people can have a card on file and get paid NET 10 when with ACH, they fall back to NET 60+ which is horrible for cash flow purposes. This is why bitcoin is such an attractive thing to many merchants, it carries with it the ease of pay and convenience of plastic but without the 2-3% transaction fees. Also, if plastic were to disappear tomorrow, do you really think that retailers would lower their prices 2-3%? Nope. I could also argue that in a cashless society, there is a far lesser need for in house accounting, check writing, paper-invoicing, bad debt collection, factoring etc. There are advantages and disadvantages to both cash and plastic. In my opinion the craziest thing is that the banks can charge .5-1.5% to process debit cards. This is essentially risk free, cash transaction that has zero rewards attached. That's a racket. I see the industry changing drastically in the next 3-10 years though with the advent of crypto currencies and peoples willingness to participate in the digital payments space.Why not? Because the money you're saving is actually money you're paying anyway.
Okay, but in lieu of cash discounts (which rarely exist), it's money I am paying regardless, so I might as well receive the rewards. Also, unless you are running a highly, highly risky business there's no way you are processing at 10%. The national average for V/MC in retail is 2.62% Amex is slightly higher and typically is about 2.89%.