What that purchase really costs
A price tag assumes you pay once. Put it on a card and carry the balance and the real price is the sticker plus every month of interest, minus the cashback. This puts all three in one number, and shows the markup you are actually paying.
The purchase
Interest is modelled by monthly amortization on the declining balance. Your issuer compounds daily, so a real statement may differ by a small amount. Everything runs in your browser; nothing is stored or sent.
The worked example, so you can check the tool
Take a $1,200 purchase on a card at 23.99% APR, paying $50 a month, earning 2% cashback.
- It takes 34 months, just under three years, to clear.
- You pay $450.83 in interest.
- You earn $24.00 in cashback, once.
- True cost: $1,626.83, a markup of about 36% over the sticker price.
The interest is 18.8 times the rewards. That ratio is the honest answer to whether cashback offsets carrying a balance.
Rewards are a rounding error next to interest. They are real money only for people who pay the statement balance in full every month. See the full rewards math.
Why the monthly payment matters more than the APR
People shop for a lower rate and then set the payment as low as they can afford, which is backwards. The payment controls how long the balance exists, and interest is charged on the balance for exactly that long. Raising the payment shortens the term and removes interest at a rate no APR shopping can match. Try the quick scenarios above.
What this tool does not include
- The grace period. Pay the statement balance in full and purchases accrue no interest, so the true cost is just the price minus cashback.
- Other balances. If you already carry a balance, new purchases may lose the grace period immediately. See how the grace period works.
- Fees. Annual fees, foreign transaction fees, and cash advance fees are separate.
- Opportunity cost. Money spent on interest is money not earning anything. See what cash can earn.
How to use the number
Before a large discretionary purchase, run it here first. Seeing a $1,200 item priced at $1,627 is a more useful decision input than a monthly payment figure, which is how the same purchase is usually presented. For loans rather than cards, use the loan payment calculator.
Frequently asked questions
What is the true cost of a credit card purchase?
The sticker price plus every dollar of interest you pay while the balance sits on the card, minus any cashback earned. A $1,200 purchase at 23.99% APR paid off at $50 a month costs about $1,651 in interest terms, and roughly $1,627 after 2% cashback, which is a markup of about 36% over the sticker price.
Does cashback cancel out credit card interest?
Almost never. Cashback is typically 1% to 2% of the purchase, one time. Interest is 15% to 30% a year on the outstanding balance, charged every month until it is cleared. In a typical carried-balance scenario interest runs many times larger than the rewards.
How is credit card interest calculated on a purchase?
Most issuers apply a daily periodic rate, which is the APR divided by 365, to the balance each day and compound it. A 24% APR is about 0.0658% per day. If you pay the statement balance in full each month, the grace period means purchases accrue no interest at all.
Does paying more than the minimum really help that much?
Yes, and disproportionately. Every extra dollar goes straight against principal, which removes all the future interest that principal would have generated. Raising the monthly payment usually cuts both the payoff time and the total interest sharply.
Is this tool storing my purchase details?
No. The calculation runs entirely in your browser. Nothing is sent to a server and nothing is saved.
What if I pay the card in full every month?
Then the true cost is the sticker price minus your cashback, and this tool will show that. Interest only applies once a balance carries past the grace period.