From the official C Innovation Manual: (page 31)
How does the Extra Credit category work?
The Extra Credit category may be used to increase a student's overall percentage for a given term up to the specified amount. After calculating the student's percentage for the term using the grading method specified in Class Options, the number of points received in this category are divided by the number of points possible in this category. That value is then multiplied by the category weight (limit) and divided by 100. This result is added to the student's calculated percentage to arrive at his/her final percentage for the term.
Note: Assignments in this category should not be flagged as extra credit. Doing so will add to the student's points received without adding them to the points possible for the category. This may result in undesired results.
Example:
If a student's calculated grade resulted in an overall percentage of 78.6% for the term, that value is then increased by:
(80 / 100) = .8 X 5% = 4.0%
Equals a total of 82.6% for the term (78.6% + 4.0%)
Mathematically, this is completely legitimate and is a valid tool if you use it the way that it is designed to be used. If you understand it, feel free to use it. But if you do not understand how this works and how a few extra credit points can make major changes to a grade, DO NOT USE IT!