Cash Back vs Low Interest Credit Card Calculator
Compare a cash back credit card against a low interest rate card.
Find which saves you more based on spending habits and carried balance.
Cash Back vs. Low Interest: The Real Math
Choosing between a cash back credit card and a low-interest card depends almost entirely on one question: Do you carry a balance each month?
How Cash Back Cards Work
A cash back card gives you a percentage of every purchase back as a reward. Common rates:
- Flat-rate cards: 1.5% – 2% on all purchases
- Category cards: 3% – 5% on groceries, gas, dining; 1% elsewhere
- Premium cards: Up to 6% in specific categories (often with an annual fee)
However, these cards typically carry high APRs — often 19% – 29% — which can easily erode your rewards if you carry a balance.
How Low-Interest Cards Work
Low-interest cards offer a reduced APR — typically 8% – 18% — at the cost of little or no rewards. They are designed for people who regularly carry a balance and want to minimize interest charges.
The Key Formula
Monthly interest cost = Carried Balance × (APR / 12)
Monthly rewards earned = Monthly Spending × Cash Back Rate
Net monthly benefit of cash back card = Rewards Earned − Interest Cost on Cash Back Card
Net monthly benefit of low-interest card = Rewards Earned − Interest Cost on Low-Interest Card
Who Should Choose Each Type?
| Situation | Best Card |
|---|---|
| You pay in full every month | Cash back card |
| You carry any balance regularly | Low-interest card |
| You carry a large balance | Low-interest card (by far) |
| You have high spending but low balance | Cash back card |
The Breakeven Balance
There is a specific carried balance at which both cards cost the same. Below that balance, the cash back card wins; above it, the low-interest card wins. This calculator shows you that exact breakeven point.
The Real Cost of Rewards
For every 2% cash back card with a 24% APR, carrying just $100 of balance costs $2/month in interest — erasing a cash back reward on $100 of spending. At $1,000 carried balance, the interest ($20/month) easily outweighs most rewards earned.
Always treat credit cards as a convenience tool, not a financing tool, to maximize the value of rewards.