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The iron rule: cashback cards only work paid in FULL by direct debit every month: one month of interest at a typical 24-30% APR erases a year of 1% cashback. Cashback is the bank paying you a slice of the merchant fees your spending generates: routing existing spending (groceries, fuel, bills where fee-free) through the card is the whole game: spending MORE to earn 1% back is losing 99p in the pound.
What The Cashback Credit Card Calculator Works Out
- Net cashback per year: monthly spend x 12 x the cashback rate, minus the annual fee. UK cards typically pay 0.25% to 1% ongoing, with higher rates reserved for fee-charging cards and introductory periods. Routing GBP 1,200 a month through a 1% card with a GBP 25 fee nets GBP 119 a year for zero behaviour change.
- Fee break-even: the monthly spend at which the cashback exactly covers the fee: fee divided by the rate, divided by 12. Below it the card costs you money.
- The rule that decides everything: cashback only works when the balance is paid in full by direct debit every month. Cards priced at 24% to 30% APR are built around the certainty that some holders revolve balances, and one month's interest on GBP 1,200 erases most of a year's 1% earnings. The fee-free 0.5% card beats the fee-charging 1% card below roughly GBP 415 a month of spend.
- Introductory rate and period (advanced): many cards pay a boosted rate (often 2% to 5%) for the first three to six months. The first-year card shows the net once the boost is included and how much more it is than a normal year.
- Annual cashback cap (advanced): some cards cap cashback (for example at GBP 100 or GBP 200 a year, or cap the boosted intro cashback). Enter it and both the normal year and the first year are limited to it.
- Alternative card (advanced): a second card's rate and fee at the same spend, so the fee-free 0.5% card and the fee-charging 1% card are compared at your actual numbers rather than the brochure's.
- Balance carried and APR (advanced): the average balance you carry month to month multiplied by the purchase APR gives the yearly interest. Compared against the net cashback it shows how many times over revolving wipes out the reward.
- Effective return on spend (advanced): net cashback minus any interest, as a percentage of the year's spending: the honest rate the card actually pays you.
- What not to count: cash withdrawals, surcharged payments and most bill types earn nothing or attract fees. Section 75 protection on purchases of GBP 100 to GBP 30,000 is a reason to route big-ticket buys through a credit card that outvalues the cashback itself.