Cash Back Calculator

What a cash back rate pays, category by category

A cash back rate is a discount on spending, paid back after the fact. The arithmetic is one multiplication per category: yearly spending times the rate. The part people get wrong is the word category, because few cards pay one rate on everything.

Take a household that spends $800 a month on groceries, $250 on dining, $180 on gas and $600 on everything else. That is $1,830 a month, $21,960 over a year. A typical category card pays 2% at the supermarket, 3% at restaurants, 4% at the pump and 1% on everything else.

Run each category through its own rate and the pieces come out at $192, $90, $86.40 and $72. Add them and the year returns $440.40. Divide that by $21,960 and the effective rate is 2.0%, not the 4% printed on the card's marketing page.

That blended number is the honest way to compare two cards. A flat 2% card on the same spending returns $439.20, which is $1.20 less than the category card and requires no attention at checkout.

Worked example: $21,960 of spending in one year

Here is the whole calculation written out, with the same numbers the calculator above uses as defaults.

Now subtract the annual fee of $95. The card pays $345.40 for the year, and that is the number to compare against a no-fee card. Then add a $200 sign-up bonus, which is paid once: the first year comes to $545.40 and every year after comes back to $345.40.

A bonus of $200 spread over 12 months is $16.67 a month. Spread over 24 months it is $8.33 a month. Keep the card past year two and that one-shot payment reads thinner next to a repeating fee.

The annual fee has to earn its keep

An annual fee is a fixed cost, so it sets a break-even spending level. Divide the fee by your blended rate and you get the yearly spending needed just to get the fee back. Below that number the fee is a loss, and above it the card starts paying.

Our example household blends to 2.0%, so $95 of fee needs $4,737 of spending, or about $395 a month. At $21,960 the fee clears with room to spare, which is why the card still nets $345.40.

A fee can still earn its spot for reasons the arithmetic does not capture, such as a warranty extension, rental vehicle coverage or a baggage policy you would otherwise buy. Weigh that separately instead of pretending it is cash back.

Sign-up bonuses, spread over the months you keep the card

A sign-up bonus is the biggest one-shot payment most rewards cards make, and it is the easiest number to overvalue. It arrives once, typically after a spending requirement in the first three months, and the card's annual fee keeps arriving every year.

That 20% slice is real but narrow. It applies to the $1,000 you had to spend to trigger the bonus, not to the $21,960 you will spend over the year. Spread $200 across the full year and it adds 0.9 points to a 2.0% rate, which takes the first-year return to 2.9%.

Two conditions decide if the bonus is worth chasing. The spending requirement has to fit spending you would make anyway, and the card has to be one you would keep past the first year. A bonus that pushes you into $1,000 of purchases you did not need is a discount on things you did not want.

Cash back against a 0% APR offer

Retailers and issuers often put a 0% APR promotion next to a cash back offer on the same purchase, and the two are not close in value once a balance rides.

Take a $2,000 purchase. The cash back card pays 2%, which is $40. If you pay the statement in full, that $40 is yours and the 0% offer is worth nothing, so cash back comes out on top.

If you carry the $2,000 for twelve months at 22.36%, the interest is $447.20. Against $40 of rewards the balance costs you $407.20 more than the same purchase on a 0% card. The tipping point takes one sentence: while a balance is carried, a cash back card comes out ahead only if its APR sits under its own cash back rate. At 2% back, that means an APR under 2%.

One caution on 0% offers: some are deferred interest plans. If a balance is left when the promotion ends, interest for the intro period can be charged back to the purchase date, which can be far more than the interest you were avoiding. The CFPB tracks these products in its card market report, and the terms are worth reading line by line before you rely on one.

When rewards stop being free money

Rewards are paid for out of the interest and fees the card collects, so households that pay in full carry the households that do not. The CFPB put numbers on that in 2024: cardholders who revolve a balance earn about 27% of the rewards at major issuers while paying 94% of the interest and fees.

The pattern is easy to read. Rewards are a percentage of what you spend, and interest is a far bigger percentage of what you owe. A card with a 2% rate and a 22.36% APR cannot pay for itself while a balance sits on it.

That does not make rewards pointless. It makes them conditional: they pay only on spending you clear at the statement, and only up to the rate the card applies to that spending.

Reading a rewards page without getting fooled

Four things in the fine print decide what a card pays.

• Caps. A 5% category often stops at $1,500 or $6,000 of spending a quarter or a year, then drops to 1%. On a $9,600 grocery budget, a 5% rate capped at $6,000 pays 5% on $6,000 and 1% on $3,600, which is $336 rather than $480.
• Rotating categories. A rate that changes every quarter rewards attention, not loyalty. If you forget to activate a quarter, that category pays the base rate.
• Redemption rules. Statement credit at one cent per point is the straightforward case. Gift cards, travel portals and transfer partners can be worth more or less, and minimum redemption amounts can strand a minor balance.
• Devaluation. The CFPB's 2024 report documents issuers raising the number of points needed for the same reward after people had earned them. A rate is a promise about today, not about 2030.

Cash back in dollars is the least ambiguous form of a reward, because a cent is a cent and there is no conversion table to check. Points and miles can outvalue it, but only if you know the redemption value you will get.

Where the numbers come from

The interest rate used in the examples is 22.36%, the Federal Reserve's figure for credit card accounts assessed interest in August 2026, published in the G.19 Consumer Credit release dated October 7, 2026. The same release puts the rate across all accounts at 21.19%. These figures pool every reporting bank, so your own rate depends on credit score, issuer and account history.

The rewards data comes from the CFPB's May 2024 Credit Card Rewards issue spotlight, which covers devaluation, redemption problems and revocation, and from the CFPB Consumer Credit Card Market report released December 30, 2025, which puts 2024 rewards at $47.5 billion and the 2024 average APR on general purpose cards at 25.2%. Those two APR readings measure different things: one is a market-wide average of stated rates, the other an average of what cardholders paid, so both can be right at once.

The calculator uses the spending, rates, fee and bonus you enter, and it adds one separate interest line for a balance you say you carry. It does not model caps, rotating categories, deferred interest, foreign transaction fees or taxes. Use the output as a rough estimate, not financial advice, and check the card's disclosure sheet before you apply.