1. What Is Credit Card Cash Back?

Credit card cash back is a reward program where a percentage of your spending is returned to you. Different spending categories often have different reward rates, allowing you to maximize returns by using the right card for each purchase.

2. How Cash Back Calculation Works

The cash back is calculated using the formula:

Where:

• Category Spend — Amount spent in each category
• Rate — Cash back percentage for each category

Example: If you spend $500 on groceries at 3% back and $200 on gas at 2% back, your total cash back would be ($500 × 0.03) + ($200 × 0.02) = $15 + $4 = $19.

3. Maximizing Your Cash Back

Strategies: Use cards with rotating 5% categories, stack multiple cards for different spending categories, and take advantage of sign-up bonuses. Many cards offer higher rates for specific categories like dining, travel, or gas.

4. Using This Calculator

Tips: Enter your spending in up to three categories along with their respective cash back rates. The calculator will sum the cash back from all categories. You can use this to compare different credit cards or spending scenarios.

5. Frequently Asked Questions (FAQ)

Q1: How is cash back paid out?
A: Typically as statement credits, direct deposits, or checks, either monthly or when you reach a minimum amount.

Q2: Are there limits to cash back earnings?
A: Some cards have quarterly maximums on bonus categories or require activation of rotating categories.

Q3: Does cash back expire?
A: Generally no, but check your card terms as some programs may have expiration policies.

Q4: Is cash back taxable?
A: Typically no, as it's considered a rebate rather than income. Exceptions may apply for business cards or large bonuses.

Q5: What's better - cash back or points?
A: Depends on your spending habits. Cash back is simpler, while points may offer better value for frequent travelers.