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Consumers who use rewards cards wisely might like to believe they’re beating the system. In the case of the Bilt Mastercard — which lets renters avoid convenience fees and earn rewards points when they charge their rent payments to the card — they may be right.
Wells Fargo, which issues and administers the Bilt Mastercard, is losing as much as $10 million a month on its partnership with Bilt Technologies Inc., The Wall Street Journal reports.
The Bilt Mastercard has been a hit with both renters and landlords who, before the card launched, faced interchange fees of between 2 percent and 3 percent when using a credit card to pay rent.
Wells Fargo, a Bilt investor that launched the co-branded Bilt Mastercard card in 2022, “eats much of the fees” so renters (or landlords) don’t have to, the Journal reported in an exclusive story Sunday.
According to current and former Wells Fargo employees who spoke to the Journal, the bank thought it could make the partnership pencil out if renters also used the card for other purchases, and if more than half of them carried a balance on the card.
Wells Fargo also hoped that it would be in a good position to provide Bilt Mastercard users with a mortgage when they were ready to make the leap to homeownership, the Journal reported.
Instead, only 15 percent to 25 percent of dollars charged to the cards are being carried as interest-generating monthly balances, and the program hasn’t boosted Wells Fargo’s mortgage business, the Journal reported in an exclusive story Sunday.
In a statement provided to Inman, Bilt characterized the WSJ article as “an inaccurate representation” of its strategic partnership with Wells Fargo.
“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,” Bilt said.
Wells Fargo said in a statement that co-branded credit cards “are one modest piece of the company’s overall credit card business strategy,” and that it can take “multiple years” after an initial launch for such ventures to pay off.
For example, When JPMorgan Chase launched its Sapphire Reserve credit card in 2016, the card put a $200 million to $300 million dent in the bank’s fourth-quarter profits, Bloomberg reported at the time.
“While still small, the Bilt card offers an innovative and unique rewards platform that has allowed us to reach new and younger customers,” Wells Fargo said.
The Journal reported that losses on the co-branded Bilt Mastercard have triggered a renegotiation of the partnership, which is scheduled to end in 2029 — with Wells Fargo reportedly not willing to renew unless it gets better terms.
“There has been no conversation among decision makers to exit the Bilt agreement,” Wells Fargo said in a statement to Inman. “To suggest otherwise is false.”
Expanding into mortgage rewards
In announcing a $200 million funding round that valued the company at $3.1 billion in January, Bilt disclosed that it also plans to venture into mortgage payment rewards.
That’s territory already being explored by Rocket Companies, which last year launched its Rocket Visa Signature Card to reward existing Rocket Mortgage borrowers and incentivize first-time homebuyers to choose Rocket when financing their home.
If they’re already making payments on a home loan serviced by Rocket Mortgage, rewards card customers can earn the equivalent of 2 percent cash back when redeeming their points to pay down their mortgage balance. Having a mortgage that’s serviced by Rocket also relieves them from having to pay the card’s $95 annual fee.
Homebuyers can redeem points to cover up to $8,000 in down payment and closing costs when financing with Rocket Mortgage, earning the equivalent of 5 percent cash back.
It’s all part of Rocket Companies’ strategy to grow its business by unlocking the lifetime value of clients by offering personal finance services through its Rocket Money subsidiary.
Bilt announced the launch of the first component of its loyalty program and payment platform, the Bilt Rewards Alliance, in June 2021.
The Bilt Rewards Alliance is a growing network of rental owners and operators with more than 4 million units under management that includes AvalonBay, Berkshire Residential, Brookfield, Cushman & Wakefield, Greystar and Invitation Homes.
Renters who live in a property that’s part of the Bilt Rewards Alliance can pay their rent through the Bilt App and earn points on rent with no transaction fees, and also build their credit history by enrolling in Bilt’s free rent reporting services to credit bureaus.
For renters who live in a property that’s not part of the Bilt Rewards Alliance, the co-branded Bilt Mastercard allows renters at any apartment in the U.S. to earn points on rent with no transaction fees and earn points on dining, travel and other purchases.
Last month, Bilt announced it was expanding the rewards program to allow condominium and co-op residents to earn rewards points when paying their monthly homeowners association fees.
Douglas Elliman Property Management, which oversees a portfolio of more than 40,000 units across nearly 400 buildings in New York City, was the first major condo and co-op property management firm to join the Bilt Rewards Alliance.
“Our partnership with Douglas Elliman is the first step in expanding Bilt Rewards beyond renters,” Bilt Chief Commercial Officer David Wyler said, in a statement.
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