1-800-555-TREE (1-888-281-6836)
Credit CardsTips

How to Choose the Best Reward Credit Cards: Using Rewards Calculators

This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer partnership.
best reward card

People who don’t carry balances on their credit cards have a real advantage — they can actually make money by using their credit cards! These smart money managers can ignore credit card interest rates and concentrate on finding the product with the best benefits.

That’s not as easy as it sounds, however. Not only are there all sorts of rewards, from merchandise, to travel, to cash, but the way you earn these nice things can be pretty complicated. Some reward cards, for example, require you to complete some form of registration each quarter to maintain your eligibility for the goodies. Others award bonus rewards according to your spending habits — one card might give you three percent cash back for entertainment and restaurant purchases, while another might reserve that privilege for gas or groceries. Some put caps on the amount you can earn in each category.

It’s Complicated

What if you’re comparing these two reward credit cards and trying to choose one? Here are the terms for Card A:

  • $100 annual fee
  • Three percent cash back on travel and entertainment purchases
  • One percent cash back on everything else
  • Cash back is limited to $50 per quarter on the travel and entertainment category
  • Cash back is limited to $50 per quarter for everything else.

And here they are for Card B:

  • One percent cash back on everything with no quarterly limit
  • Lets you check bags for free when you travel, which would typically save you $80 per year
  • Annual fee of $50

Which is the better deal if you typically spend $2,000 per quarter on travel and entertainment and $5,000 on everything else? It’s not easy to tell.

With Card A,  you’d earn a $60 in bonus rewards for travel (three percent of $2,000) and $50 for everything else (one percent of $5,000). However, travel is capped at $50, and your cash back for other purchases also maxes out at $50, so you’d earn $100 per quarter, or $300 per year after paying the annual fee.

Card B would pay you $70 per quarter (one percent of $7,000 with no limit on the payout). Your annual cash back would be $280 plus the $80 in free baggage, less the $50 annual fee — $310 per year in benefits to you, which is slightly better than Card A.

Rewards Calculators

The best rewards card for you, then, depends on your customary spending patterns as well as the type of goodies you prefer.  Wouldn’t it be nice if there were a handy calculator to quickly and easily help you compare real credit card rewards and find the best one for your spending profile?

Start happy dancing — there are such calculators.

Most rewards calculators help you select the best credit card rewards for your spending profile, once you input your typical spending amounts and the categories in which you spend. They can provide very good information, but some are less user-friendly than others.

LendingTree’s rewards calculator lets you also input your spending, or you can choose a “quick and dirty” calculation that provides an answer without requiring you to input the exact amounts for everything you buy.

Supply the rewards card calculator with your typical spending pattern, and it will run the numbers for you, suggesting the rewards cards that will offer the most benefits to you.

Using LendingTree’s Credit Card Rewards Calculator

The rewards calculator has two modes — lazy and custom. To access lazy mode, simply choose your charging pattern — average, more than average, or less than average — in categories like groceries, gas, dining, entertainment and clothing. These amounts were obtained from the United States Department of Labor Statistics, or BLS. After selecting your spending level, check out the numbers that pop into the various categories to see if they are similar to your spending habits. If not, try a higher or lower level.

The calculator will list the cards that, given your spending profile, will reward you the most.

Custom Mode

For those who want a more accurate assessment, there is custom mode. Review your spending over the last few months and enter the monthly amounts you charged in each category, or simply make an educated guess about your typical spending. Again, the calculator will compare your spending patterns to the bonus rewards offered by competing credit cards, and it will list the ones best-suited to your lifestyle.

When One Is not Enough

Most rewards cards limit the benefits you earn in various spending categories, or the amount you can earn overall in a given quarter, month or year. If your spending causes you to max out a particular benefit, it might be advantageous for you to sign up for more than one rewards card.

For example, say you do a lot of business travel and spend $8,000 on it every quarter, plus $5,000 on everything else. And suppose the most generous rewards card (with a $200 annual fee) gives you five percent cash back on that travel and one percent on everything else — but the quarterly travel rewards are capped at $150 (travel expenses exceeding $3,000 are just counted as “regular” spending). Without the cap, you’d earn $450 per quarter, but with the cap, you earn $250. That’s $1,000 per year, minus the $200 annual fee = an $800 annual benefit.

What if, however, you were able to add a second card — one that paid three percent for travel and one percent for everything else, with a $100 annual fee and a total award cap of $150 per quarter? By charging your first $3,000 of travel on the first card and $5,000 of travel on the second card, you’d maximize the cash back on your travel. Your first card, then, would pay you $150 per quarter for the $3,000 in travel you charge on it, plus $50 for your $5,000 in other spending, for a total of $200 each quarter ($600 a year after paying the $200 annual fee). But you’ll also get $150 per quarter for the $5,000 in travel charged to the second card, which is $600 per year for a benefit of $500 after paying the $100 annual fee. So using the two cards together pays you $1,100 per year, $300 more than you’d get by just using one rewards card.

Here’s how it works:

Find the Right Credit Card