How to Calculate Cash Back
The cash back formula
Cash back is a percentage of spending, so the math is direct. On a flat 2 percent card, $2,000 a month is $40 a month, or $480 a year. On a category card, do each category separately: 5 percent on $500 of groceries is $25, 1 percent on $1,500 of everything else is $15, and so on, then add them up. Subtract the annual fee at the end for your true net.
Watch caps and rotating categories
Many high-rate cards cap the bonus, such as 5 percent on the first $1,500 per quarter, after which the rate drops to 1 percent. Rotating-category cards change the 5 percent category every quarter and often require activation. Factor the caps in, or you will overestimate, which is why a rotating card can earn less than its headline rate suggests. See how bonus categories work.
Compare cards, not just rates
A higher headline rate does not always win once caps and fees are in play, so the honest comparison is total annual cash back after the fee. Enter your spending into the credit card rewards calculator to see every card’s real cash back side by side, and compare the simple flat-rate options in best cash back cards.
Frequently asked questions
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