Effective Reward Rate Calculator
Calculate your "real" average return on spend across all categories.
Your Blended Rate
Effective Reward Rate
Total Cash Back Earned
How This Tool Works
This calculator reveals your Effective Reward Rate—the actual percentage of cash back you earn across all your spending, not just the high-multiplier categories.
- Formula:
(Total Cash Back Earned / Total Spend) * 100 = Effective Rate %. - Logic: A card might earn 5% on dining, but if dining is only 10% of your budget, your overall return won't be 5%. This tool calculates the weighted average.
- Assumptions: We assume you pay off your balance in full every month (paying interest destroys all reward value).
How to Use (Steps)
- Enter Spend by Category: Input your monthly spending for Dining, Groceries, Gas, and Other.
- Set Reward Rates: Enter the % you earn for each category (e.g., 3% for Dining).
- Calculate: Click the button to see your "Blended" Effective Rate.
- Optimize: If your effective rate is below 2.0%, you might be better off with a simple 2% flat-rate card.
Example Calculation
Scenario: High category multipliers, low base spend.
• Dining: $200 @ 5% = $10.
• Groceries: $400 @ 3% = $12.
• Other: $1,400 @ 1% = $14.
• Totals: $2,000 Spend, $36 Cash Back.
• Effective Rate: ($36 / $2,000) = 1.8%.
• Verdict: Despite the "5%" card, you are earning less than a standard 2% flat-rate card.
Why This Tool Is Accurate
Marketing highlights the "Up to 5%!" rewards, but math reveals the truth. Most people spend the majority of their money in the "Other" (1x) category (bills, medical, auto repair, insurance). This tool exposes the drag of that 1x spend.
Limitations & Disclaimer
This tool assumes cash back values. If you earn points, you must estimate their value (e.g., treat 1 Amex point as 1.5 cents). Disclaimer: This is for educational estimation only.
Frequently Asked Questions
Anything above 2.0% is good, as that beats the standard "2% on everything" cards (like Citi Double Cash). If you can reach 3.0% or higher across all spend, you have an optimized expert setup.
If your effective rate with multiple cards is less than 2%, yes! Using a single 2% card is simpler and often more profitable than juggling 3 cards just to get 1% on most of your purchases.
This tool only looks at rewards earned. To see the full picture including fees, use our Annual Fee Breakeven Calculator. A high fee will lower your net effective rate significantly.