Savvy Americans have found a cunning way to build points with a rewards credit card
Savvy Americans have figured out a cunning way to build their reward points by signing up for the first ever credit card centered entirely around paying your rent.
Wells Fargo and startup Bilt launched the Bilt Mastercard in 2022, a rewards credit card that attracted over one million new accounts in its first 18 months.
With the Bilt card, users can pay their rent without their landlord passing the two to three percent transaction fee onto them.
Their rent payment is also eligible for points - one per dollar spent - that can later be redeemed to book flights, hotels or rental cars. Or they can be transferred to travel partners including American Airlines, Air France and Marriott Bonvoy.
Normally, some credit card customers carry balances over from month-to-month - needing to pay interest to the bank.
However, the Wall Street Journal reports that the customers who took up the Bilt Mastercard are savvier than most - and aren't carrying balances at nearly the rate executives anticipated.
Wells and startup Bilt launched the Bilt Mastercard in 2022, a rewards credit card that attracted over one million new accounts in its first 18 months
Credit card issuers make the bulk of their money from interest they charge if their customers don't pay off their balance in full at the end of the month.
But initial reports suggest Bilt card users have been paying off their card every month because they are primarily using it for rent, thereby racking up free points on what otherwise would be a mandatory expense.
Wells expected 65 percent of purchases on the card would be non-rent prior to launch. The reality ended up being the opposite.
That inaccurate prediction hit the bank hard because, under the existing deal, Wells takes a hit on much of the transaction fees renters would normally be responsible for.
The San Francisco-based bank has also been paying its partner Bilt a fee of around 0.8 percent per rent transaction.
And even though it earns fees every time someone swipes their card for anything but rent, Wells splits that with Bilt. Finally, Bilt receives $200 from the bank every time someone signs up for a new account.
Wells told the Journal that dual brandings like this one are a 'modest piece' of its credit-card business.
'As with all new card launches, it takes multiple years for the initial launch to pay off,' said a spokeswoman for the bank. 'We look forward to continuing to work together to…make sure it's a win for both Bilt and Wells Fargo.'
Bilt was harsher in its response to the bombshell piece, saying the Journal's reporting that the scheme is just beneficial for Bilt 'is an inaccurate representation' of the partnership.
The startup said: 'Following our co-brand card's successful launch in 2022, we have been impressed by the early traction and growth and we are committed to a long term partnership with Wells Fargo that benefits all parties, most importantly - our customers.'
The partnership between Bilt and Wells Fargo is in contract until 2029 - and the bank has refuted claims that there have been conversations to exit the agreement.
Wells Fargo CEO Charlie Scharf, left, signed off on the Bilt deal to hopefully reinvigorate the bank's credit card offerings and lead to more mortgages down the line
Behind the scenes, Wells is reportedly telling Bilt that cardholders are not paying nearly enough interest for this to ever become profitable.
Meanwhile, Bilt is upset over the bank replacing marketing of the Bilt card in Wells Fargo branches with its own native credit cards.
The story of Bilt began in 2019, when Jain founded the company. His mission was to find a bank partner to issue its first credit card, since his firm wasn't capable of lending on its own.
Major lenders such as U.S. Bancorp and Synchrony Financial passed on Jain's pitch.
When Jain brought his proposition of a rent-based card to Wells, some employees apparently thought the idea was crazy, according to the WSJ's report.
But at this time, Charlie Scharf was the CEO and one of his major goals was to revitalize the company's credit card offerings.
The thought was that they could attract younger customers who were renting for the time being but had ambitions to get a mortgage someday. According to data, 70 percent of of Bilt cardholders are new customers to Wells Fargo - and their average age is 30, with an average FICO score of 760.
CEO Jain emphasized the way this is benefitting Wells Fargo: 'These are highly valuable customers to any bank being acquired at a far lower cost.'
The Bilt Mastercard offers 3x points on dining, 2x points on travel and 1x points on rent. Though data shows that more than half of transaction volume is dedicated to rent, which Wells Fargo makes the least money on
If Wells was the one behind the popular Bilt card, perhaps those cardholders would pick them as their preferred mortgage lender down the line.
The bank's reputation was also on the rocks at the time after admitting to a long-running fraudulent practice whereby company employees opened millions of unauthorized bank accounts in order to meet unrealistic sales goals.
Wells agreed to pay $3 billion in penalties for this conduct back in 2020.
The contract is set to last until 2029, meaning that Americans have roughly five years left to sign up for the card that's become the favorite of travel-hungry apartment dwellers.
