# Cash Back Calculator

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Disclaimer: Whilst every effort has been made in building our calculator tools, we are not to be held liable for any damages or monetary losses arising out of or in connection with their use. Full disclaimer.

Cash back rewards have been around for a long time, having first been introduced by the Discover card in 1986. 1 Nowadays, they're a common feature of many credit cards. While our calculator can help you work out your cash back reward, it's worth taking some time to look at what cash back rewards actually are and how they typically work.

## What is cash back?

Cash back is a rewards program with a simple premise: for each dollar or pound you spend, a percentage is returned back to you. This is usually in the form of a statement credit, direct deposit or a gift card. Reward rates tend to vary, and you may receive anywhere from 1% to 5% (or even higher during promotions).

## How does cash back work?

Cash back is a fairly standard and simple process to get your head around. Here's how it works:

1. Make a purchase: Use your cash back credit card or join a cash back program.
2. Earn cash back: A percentage of your purchase amount is calculated as cash back. As an example, if you spend \$100 on a card with a 2% cash back rate, you'll earn \$2 back.
3. Redeem your rewards: Rewards can be redeemed in various ways (depending on your card issuer), such as a statement credit, bank deposit, or gift card.

The process for calculating cash back rewards is simple: multiply the purchase price by the cash back percentage rate offered by your card or program. Using our example from above, if you spend \$100 and your card offers 2% cash back, your calculation will be: (100 × (2 ÷ 100)) = \$2.

Cash Back = Purchase Price × (Cash Back Percentage ÷ 100)

So, you know what cash back is and how it works. Let's go over some common strategies that can help you get the most out of your cash back rewards:

1. Choose the right card: Different cards offer various cash back rates in different categories. Experts commonly suggest you choose a card that offers higher cash back rates in categories where you spend the most. Some cards offer rotating categories with higher rates on groceries, gas, or dining. 2
2. Utilize special offers: Credit cards often have special promotions where you can earn additional cash back. If you regularly check your card’s offers page, you may be able to activate relevant deals that might help you save more.
3. Stack rewards: Combining cash back with other savings methods such as coupons, store loyalty programs, and shopping portals can significantly increase your savings.
4. Know your caps: Make sure you're aware of any limits on cash back earnings per purchase or annually, to ensure you're maximizing your rewards.
5. Utilize resources: Websites like CashbackMonitor track current offers for cash back, airline miles, hotel points, or credit card points. It's a great resource to help you compare, at a glance, the best deals across various shopping portals.
6. Avoid interest: An important one, this. To truly benefit from cash back rewards on your credit card, make sure you pay off your balance each month to avoid interest charges that might negate your savings.

BankRate.com has an excellent article discussing how to maximize cash back rewards with your credit card.

### Are there limits on how much cash back I can earn?

Yes, some cards cap the amount you can earn from cash back rewards, either per purchase or annually. If you know your limit, you can use our calculator to help you factor these in.

### What happens if I return a purchase?

If you return an item, the cash back earned from that purchase is normally deducted from your rewards balance​. So, doing a mass purchase of items to take advantage of a cash back offer, and then returning them, isn't going to benefit you.

## Final thoughts

Earning cash back is a really good way to get more value from your spending. By understanding how cash back works and strategically using the cards you have, you can save a significant amount over time. The key, however, is to choose the right card, leverage special offers, and avoid carrying a balance to properly maximize your benefits.

Calculator by Alastair Hazell.

### Calculator references

1. Investopedia. What Is Cash Back? Hint: It's Not Free Money.
2. Money Geek. How to Choose a Cash Back Credit Card.