Cashback Break-Even Calculator

How cashback cards make money for you

Cashback credit cards return a percentage of your spending as a reward. Many also charge an annual fee, and some have a fee that is waived in the first year or for certain levels of spending. The question is whether the rewards you earn are larger than the fee. This calculator finds the spending level at which the two balance, and the net value for the spending you expect.

The break-even point is useful because it turns a vague promise into a number. A card that rewards 1.5% with a 95 fee needs 6,333.33 of annual spending to pay for itself. Below that, the fee costs more than the cashback; above it, the card earns a net reward.

How the result is worked out

The break-even spending is the annual fee divided by the cashback rate. The net value at your expected spending is that spending multiplied by the cashback rate, minus the annual fee. A positive net value means the card pays; a negative value means the fee outweighs the rewards at that level of spending.

A worked example

Suppose you expect to spend 20,000 a year on a card with a 95 fee and 1.5% cashback. The card returns 300 in cashback, and after the fee you are 205 better off. The break-even spending is 6,333.33, which you comfortably exceed. If your spending were 5,000, the cashback would be 75, leaving you 20 worse off than having no card.

Read the terms before you rely on the rate

Cashback rates are often not flat. Some cards pay a higher rate on certain categories, such as groceries or fuel, and a lower rate elsewhere. Some cap the total cashback each year, or pay it only once a threshold is reached. The calculator uses a single flat rate, so for these cards, enter an average you expect to earn.

Check whether the annual fee is charged every year, whether it can be waived, and whether a fee is charged to hold the card in its first year. Factor these into the decision.

The interest trap

Cashback only beats interest if you pay the balance in full each month. Interest on an unpaid balance is usually far higher than the cashback you earn, so a card with rewards can cost more than it returns if you carry a balance. If you are not sure you can pay in full, a card with no fee and a lower rate may be the safer choice.

What the calculator does not include

Interest on unpaid balances, late fees, foreign transaction charges, and the value of other benefits such as travel insurance are not included. The calculator also does not account for any change in the rate or the fee over time. Use the result to compare cards on a like-for-like basis, not as a complete measure of their value.

Choosing a card for your own spending

The right card depends on where you spend. Sort your last three months of card spending into categories, such as groceries, fuel, travel and online shopping, and check which cards pay the best rate in each. A card that pays a high rate on one category may be worse overall if most of your spending falls elsewhere. Combine the rewards with the annual fee and any interest you expect to pay, and compare the net figure rather than the headline rate.