Cash back is only a win if you pay the card in full every month – one month of interest wipes out a year of 1–2% rewards. Rotating 5% categories are often capped at $1,500 of spending per quarter.
How to use the Cash Back Calculator
- Purchase amount
- Cash back rate
- Cash back limit (0 = no limit)
- Yearly spending on the card
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the purchase amount, the cash back percentage and any cap.
Tips
- Know the difference between margin (profit ÷ price) and markup (profit ÷ cost).
- Apply successive discounts one after another – they do not simply add up.
- Check whether prices already include sales tax or VAT.
- Round prices only at the very end of the calculation.
Common mistakes to avoid
- Adding discount percentages together.
- Pricing from a target margin using the markup formula.
- Forgetting payment-processing and shipping fees.
Inputs explained
| Field | What to enter |
|---|---|
| Purchase amount | Amount in your currency |
| Cash back rate | In % |
| Cash back limit (0 = no limit) | Amount in your currency |
| Yearly spending on the card | Amount in your currency |
What each result means
- Effective price = [Purchase amount] – [Cash back]
- Yearly cash back = [Yearly spending on the card]×[Cash back rate]÷100
Example values
How the main result changes when Purchase amount changes and everything else stays at the example values above:
| Purchase amount | Cash back |
|---|---|
| 125 | 2.5 |
| 187.5 | 3.75 |
| 250 | 5 |
| 312.5 | 6.25 |
| 375 | 7.5 |
| 500 | 10 |
Formula
Cash back = min(purchase × rate, cap)Effective price = purchase − cash backYearly cash back = Σ category spending × category rateWorked example
Inputs — Purchase amount: $250; Cash back rate: 2 %; Cash back limit (0 = no limit): $0; Yearly spending on the card: $18,000.
Results — Cash back = $5.00; Effective price = $245.00; Yearly cash back = $360.00.
Frequently asked questions
How does cash back work?
You get a percentage of each purchase back as a statement credit, deposit or points.
Is cash back taxable?
Credit card rewards on purchases are generally treated as rebates, not income.
What is a good cash back rate?
2% flat on everything is strong; 3–5% in bonus categories.
What formula does the Cash Back Calculator use?
Cash back = min(purchase × rate, cap).