How cashback percentages work
Cashback is a percentage of your spending returned to you. "2% back" means every $100 spent earns $2. The 3D jar above fills with coins as your rewards accrue — but notice it stops filling once you hit the cap. Two details decide whether a rewards program is genuinely worth it:
Category vs. flat
Some cards give a flat rate everywhere; others give 4–5% in narrow categories (travel, one store) and 1% elsewhere. Match the program to where you actually spend.
Caps
Many rewards are capped (e.g., "up to $1,250/year"). Above the cap, your effective rate drops. Spending $80,000 at a $1,250 cap is really ~1.6%, not 2%.
Fees & breakeven
A paid tier only wins if rewards minus fee beat the free tier. The calculator shows your net — turn the fee up until it turns red to find your breakeven.
Breakeven, worked out
The rule is simple: upgrade is worth it when (extra reward rate × your spending) > annual fee. Suppose a paid tier adds 1% over the free tier and costs $60/year:
| Annual spend | Extra 1% reward | Worth the $60 fee? |
|---|---|---|
| $3,000 | $30 | No — you lose $30 |
| $6,000 | $60 | Breakeven exactly |
| $12,000 | $120 | Yes — net +$60 |
| $25,000 | $250 | Yes — net +$190 |
So the "2% that runs automatically, up to $1,250/year" is real value if you spend enough to clear any upgrade fee. If your spending is low, the free tier often wins. The simulator makes your personal number obvious.
Common traps
Spending to earn
Rewards are a discount on money you were going to spend anyway. Buying extra to earn cashback is a net loss — you spend $100 to get $2.
Interest wipes it out
Carrying a balance at 20% APR erases any 2% reward many times over. Rewards only make sense if you pay in full.
Unredeemed points
Points that expire or sit unused are worth zero. Cash-back that deposits automatically is simpler and harder to waste.