How do you calculate cash-back rewards?

Multiply each purchase amount by the cash-back rate and divide by 100. For example, at 2% cash back on a $100 purchase, you earn $2 in rewards. This calculator scales that idea to your regular monthly spending and any bonus categories.

What does effective cash-back rate mean?

The effective cash-back rate is your net rewards after annual fees divided by your total annual spend. It reflects the real overall rate you are earning across all purchases once fees are considered.

How is the sign-up bonus handled?

Enter the bonus amount, minimum spend, and deadline (in months). If your total spending over that period meets or exceeds the requirement, the bonus is added to your first-year rewards. The calculator does not repeat the bonus in later years.

What is break-even spend for a card with an annual fee?

Break-even spend is the approximate amount you need to spend in a year so that your rewards equal the annual fee. Below that level, a no-fee card with a lower rate might be better; above it, the higher-rate card can come out ahead.

Does this calculator consider interest or debt?

No. The calculator assumes you pay your statement in full and avoid interest charges. If you carry a balance, interest can cost far more than the rewards; in that case, focusing on paying down debt is usually more important than maximizing cash back.

Cash Back Rewards Calculator (Simple) — Quick First-Year & Ongoing Value

Results

Monthly rewards

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Annual rewards

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First-year (with bonus)

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Net annual (− fee)

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Effective rate

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Break-even spend

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Bonus earned?

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Assumes you pay your statement in full (no interest charges). Carrying a balance can cost far more than the rewards you earn.

How to calculate cash-back rewards

You can estimate cash-back rewards by multiplying your purchase amount by the cash-back percentage and dividing by 100. For example, a 2% rate on a $100 purchase earns $2 in rewards.

Many cards pay a base rate on all purchases and a higher rate for one or more bonus categories (for example, groceries, gas, or travel). This calculator lets you enter one bonus category in simple mode, enough for a quick comparison.

Why do companies provide cash back?

Card issuers use rewards to attract new customers and encourage card usage. They earn money from interchange fees paid by merchants, interest on carried balances, and other charges.

A typical card design includes:

A flat base rate on all purchases.
Higher rates in one or more categories, often with caps.
Limited-time sign-up bonuses for new cardholders.
Sometimes an annual fee that higher rewards are meant to offset.

Why calculate your cash-back amount?

Cash-back rewards act like a rebate on your spending. Understanding how much you earn helps you:

Compare one card against another.
Decide if a card with an annual fee is worth it for your spending patterns.
Check whether a limited-time sign-up bonus is actually attractive for you.

This page shows:

Monthly and annual rewards
First-year value (including bonus if you meet the spend requirement)
Net annual rewards after subtracting any annual fee
Effective cash-back rate (net rewards ÷ total spend)
Break-even spend needed to cover the annual fee

Cash-back formula

C = (P × R) / 100

where:
C = total cash-back amount
P = purchase amount
R = cash-back rate (%)

Practical example

Suppose you spend $750 per month at a flat 2% rate: you earn 750 × (2 / 100) = $15 per month, or $180 per year.

If $300 of that spend is in a 5% category and the rest at 2%, your monthly rewards become: 300 × 5% + 450 × 2% = 15 + 9 = $24, or $288 per year.

How to use this calculator (simple mode)

Inputs

Total spend / month — your combined monthly card spending.
Base cash-back rate — the flat rate that applies to all non-bonus spend.
Bonus category spend (optional) — monthly spend in one higher-earning category.
Bonus category rate — the rate on that bonus category.
Annual fee — yearly fee for holding the card, if any.
Sign-up bonus (optional) — bonus amount, minimum spend, and deadline in months.

Outputs

Monthly rewards and annual rewards from ongoing spend.
First-year value, including bonus if you qualify and minus the annual fee.
Net annual rewards excluding one-time bonuses.
Effective cash-back rate (net annual ÷ total annual spend).
Break-even spend — approximate annual spend needed to cover the fee.

FAQs

Is there a limit to cash-back rewards?

Some cards cap the amount of spend that can earn an elevated rate (for example, 5% up to a monthly or quarterly maximum). After you hit the cap, purchases usually fall back to the base rate.

What is 5% cash back on $100?

It’s $5 in rewards on qualifying purchases. Over many transactions, those small amounts can add up quickly, especially in categories where you spend a lot.

How is a sign-up bonus counted here?

The calculator checks whether your total spend within the bonus window (months × monthly spend) meets the minimum spend requirement. If it does, the bonus is added to the first-year value only.

How can cash back be profitable for card companies?

Rewards are funded by interchange fees from merchants, interest charges on carried balances, and other card fees. Issuers use cash-back programs as a marketing tool to encourage card usage and loyalty.

Are cash-back rewards taxable?

In many places, spending-based rewards are treated as purchase rebates rather than taxable income, but rules can vary. For personal tax advice, check local regulations or talk to a professional.