What Everyday Spending Can Earn
At a flat 2% cash-back rate, $500 in eligible purchases earns $10 before costs. These are illustrative figures for explaining the calculation, not the terms of a particular card.
The purchases that qualify matter as much as the percentage. A higher rate may apply to certain stores or categories, with a different rate elsewhere. Spending caps and the period over which they apply also affect the total reward.
A welcome bonus belongs in a separate part of the calculation. It may require eligible purchases within a stated period and may be available only to qualifying new customers. A credit limit describes borrowing capacity; it is separate from a bonus or cash-back payment.
Subtracting Fees and Interest
Continuing the example, $500 a month in eligible spending totals $6,000 over a year. At 2%, that earns $120. An illustrative $95 annual fee leaves $25 before interest and other charges. The same reward with no annual fee leaves $120 before those other costs.
This comparison uses purchases already in the household budget. Buying an extra item to earn a small percentage back increases the amount spent.
Interest can reduce or exceed the reward. When a credit card provides a purchase grace period and no balance is being carried, paying the balance in full by the due date can avoid interest on new purchases. Paying the minimum may still leave a balance that accrues interest.
Related searches: Cash Back Cards · Credit Card Bonuses · No Annual Fee Cards
Credit Cards and Debit Rewards
Cash back also appears on debit products. The Walmart MoneyCard offer is a reloadable debit account. Its published cash-back terms cap rewards at $75 per reward year, with eligible rewards available for redemption at the end of that year.
The account also has a monthly fee that can be waived with eligible direct deposits. Regular debit purchases use account funds, but account fees still belong in the savings calculation.
Redemption timing deserves a place beside the earning rate. A reward available once a year serves a different budgeting purpose from one available more frequently. The redemption method also determines whether it arrives as cash, an account credit or another benefit.
A useful comparison records expected rewards, applicable fees and likely interest for the same period. The ongoing earning rate deserves another look after any welcome offer ends, especially if the household's usual spending changes.
More offers appear in Credit Card Bonuses. Further budgeting ideas are available in Frugal Living & Finance, with other earning options in Earn Cash & Rewards.