Cash rewards credit cards offer a simple and effective way to earn money back on your everyday purchases. Unlike points or miles that might require complex redemption strategies, cash back is straightforward: you spend money, and you get a percentage of that money back as a statement credit, direct deposit, or check.
How the Calculator Works
This calculator helps you estimate your potential monthly cash back earnings based on your spending habits and the reward structure of your credit card. It considers both a base reward rate on all purchases and potentially higher rates for specific bonus categories.
The calculation involves two main parts:
Base Rewards: This is calculated on the portion of your spending that doesn't fall into bonus categories. The formula is: `(Monthly Spending – Bonus Category Spending) * (Base Reward Rate / 100)`
Bonus Category Rewards: This is calculated on your spending within designated bonus categories. The formula is: `Bonus Category Spending * (Bonus Category Rate / 100)`
The total estimated monthly rewards are the sum of these two components.
Key Inputs Explained:
Average Monthly Spending (USD): This is the total amount you typically spend on your credit card each month across all categories.
Base Reward Rate (%): This is the standard percentage of cash back you earn on purchases that are NOT in a bonus category.
Bonus Category Spending (USD per month): This is the amount you spend specifically on purchases that qualify for a higher reward rate (e.g., groceries, gas, dining).
Bonus Category Rate (%): This is the higher percentage of cash back you earn on your bonus category spending.
Example Calculation:
Let's say you spend an average of $2,000 per month:
$1,500 is on general purchases.
$500 is on groceries (a bonus category).
Your card offers:
A base reward rate of 1.5% on all purchases.
A bonus category rate of 5% on groceries.
Here's how the calculator would estimate your rewards: