In the miles & points world, many of us are familiar with the Bilt Mastercard® (review), which is a valuable no annual fee card that allows you to pay your rent by credit card and earn rewards, even if your landlord doesn’t ordinarily allow no-fee credit card payments.
Bilt offers great value for members, though I know many of us have been curious how sustainable the business model is. The company’s valuation keeps increasing (into the multiple billions), but growth and a high valuation don’t necessarily translate to profitability.
Bilt has this week published a roughly 1,700-word letter that it also sent to members, signed by the company’s CEO. It’s interesting on a few levels:
- It hints at changes coming to the Bilt Mastercard
- It teases new opportunities to earn points, including for mortgages and more
- It explains Bilt’s business model, and how the company makes money
What I can’t figure out is if this letter is genuinely intended to be as positive as it sounds, or if this is simply hinting at major (negative) changes to the credit card, given the rocky relationship between Bilt and Wells Fargo.
In this post:
Bilt plans changes to its Wells Fargo credit card
Bilt’s co-branded credit card is issued by Wells Fargo, and several months ago we learned how Wells Fargo is reportedly losing $10 million per month on this product. As cardmembers know, you can earn points for paying rent at no extra cost. Here’s what we learned about the economics of the card, at the time:
- Wells Fargo pays Bilt a 0.8% fee on all rent transactions, even though Wells Fargo isn’t collecting any interchange fees from landlords (Wells Fargo is paying Bilt since Bilt issues rewards to members for these transactions)
- Wells Fargo pays Bilt $200 each time that a new card account is issued, which is similar to what you’ll find for co-brand agreements with airlines and hotels
- Wells Fargo had projected that around 65% of purchase volume on the Bilt Mastercard would be non-rent expenses, generating interchange fee revenue; the reality is inverted
- Wells Fargo projected that around 50-75% of purchases charged to the card would carry over month-to-month, generating interest charges, while the reality is instead 15-25%
In other words, Wells Fargo is losing money on the agreement. So it’s worth noting how the letter repeatedly almost tries to downplay the importance of the card, noting that only 15% of Bilt members have the card:
- “While our award-winning cobrand credit card has received much attention, it remains just one part of our business”
- “In our first two years, the Bilt Mastercard gave us a bridge to rewarding customers on rent payments while we built something much bigger”
- “With guidance from industry legends Ken Chenault (former American Express CEO and Bilt Chairman) and Phillip Riese (former President of American Express Consumer Card), we are building towards Bilt Card 2.0”
- “This next evolution of our card program would focus on tiered offerings that better serve different member needs while delivering enhanced value through new benefits on housing spend and our neighborhood network”
It’s also interesting how Bilt basically throws Wells Fargo under the bus, accusing Wells Fargo of not really offering the “support” that Bilt needs:
“I’ve been reading and passing along your feedback and requests for the current Wells Fargo issued-and-operated Bilt card program. We know you want more premium offerings – and also ways to earn points on your mortgage payments. We also hear the challenges many of you have had with approval rates, credit line sizes, and the need for core tech features like authorized users, pay over time, and auto-pay integrations. Some of you have mentioned that your credit limits are too low to cover more than a month or two of rent, leaving little room to take full advantage of the card’s benefits – especially considering the average FICO for these members is above 750. We hear you loud and clear. These are all things that require support from our issuing bank partner, and we’re actively working on solutions.”
We’ll see how this evolves, but I can’t imagine it will be good news for cardmembers. After all, the card issuer is losing money on the product, and that’s not sustainable in the long run. But essentially describing the card as “a bridge” for the first two years doesn’t give me a whole lot of confidence.
Bilt also emphasizes how you can earn points on paying rent even if you don’t have a Bilt Mastercard. That’s true, though keep in mind how much less rewarding it is. Rather than earning one point per dollar spent, you earn a total of 250 points per month for on-time payments, and only if you live at a Bilt Alliance network property. That’s objectively worth maybe a few dollars (which is better than nothing, but not much to get excited about).
Bilt wants to offer points for mortgage payments
The letter goes on to explain that starting in 2025, Bilt will start offering opportunities to earn points on mortgage payments. Now, we don’t know what will look like, and I wouldn’t necessarily expect it to be as lucrative as the opportunities to earn points for rent if you have a co-branded credit card. Quite to the contrary, I’d be willing to bet that it won’t be that lucrative. But still, something is better than nothing.
Bilt also plans to expand opportunities to earn rewards on rent payments, whether using Bilt’s credit card or another card, though we have no additional details beyond that.
Bilt explains its business model, sort of
The main part of the letter of Bilt is dedicated to explaining how Bilt’s business model works, and how it’s essentially three interconnected businesses. The letter mentions that while the credit card has received a lot of attention, it’s just one part of the business, and that the company’s three robust and interconnected businesses form “the largest housing rewards platform in the country.”
To summarize this in the most basic way possible (and then you can read the slides below for more details):
- One part of the company’s business is residential payment processing, as $700 billion in rent payments are processed in the United States annually; Bilt gets paid a fee for processing these payments, and passes on some of those rewards to members
- Another part of the company’s business is connected commerce, whereby Bilt gets a commission when people dine at certain restaurants, ride with Lyft, get prescriptions refilled at Walgreens, etc.; then members earn some rewards
- The last part of the company’s business model is leasing and home buying incentives, whereby the company is able to make money from the incentives that both property managers and brokers spend in order to get clients
There’s no denying that those are all potentially big revenue streams, and Bilt has the advantage of having scaled both its membership base and its network of partner properties. However, I think it’s pretty noteworthy how Bilt basically doesn’t consider a co-branded credit card to be the core of its business.
While there’s value to Bilt in general, unarguably the most attractive aspect for consumers is the credit card, since that potentially unlocks the most rewards.
Bottom line
Bilt has sent a letter to members explaining how it makes money, how changes are coming to the credit card, and how the company hopes to offer more opportunities to earn points starting in 2025.
Reading between the lines, what stands out to me the most is that major credit card changes may be coming sooner rather than later. If there are changes, I have a hard time imagining the core value proposition will be as good as it is now, being able to earn one point per dollar on rent payments with a no annual fee card.
What do you make of this letter from Bilt?
I know everyone here thinks Well Fargo is going to drop Bilt but even losing 10 million a month is rounding error on Wells Fargo's bottom line. They make 5 times that every day. They aren't going to cancel the contract unilaterally. They'll stop taking on new customers and not renew when it comes up.
I definitely read this as a "we know our credit card's days as it is are numbered so want to tell everyone we're not just living off a great deal we got off WF." I imagine it's setting the table for massive changes to the credit card that will be needed to keep WF or hook someone else. I read it as we're gonna cut everything good from the no annual fee card (or eliminate...
I definitely read this as a "we know our credit card's days as it is are numbered so want to tell everyone we're not just living off a great deal we got off WF." I imagine it's setting the table for massive changes to the credit card that will be needed to keep WF or hook someone else. I read it as we're gonna cut everything good from the no annual fee card (or eliminate it all together) and move the benefits to a new high annual fee card - adding some coupon book style "benefits" to make it look like an upgrade.
I'd love to use Bilt, but need to push an ACH payment to the property owner's routing/account number. He will not pull it using Bilt's routing/account number. I can't find a push option - can anyone advise? Thanks!
"Wells Fargo projected that around 50-75% of purchases charged to the card would carry over month-to-month, generating interest charges, while the reality is instead 15-25%"
I guess the point of the letter is that they don't have enough financially vulnerable suckers to offset the cost of the program and they're realizing they never will and need to find ways to justify their existence to whichever bank comes next after WF dumps them.
IMO the biggest...
"Wells Fargo projected that around 50-75% of purchases charged to the card would carry over month-to-month, generating interest charges, while the reality is instead 15-25%"
I guess the point of the letter is that they don't have enough financially vulnerable suckers to offset the cost of the program and they're realizing they never will and need to find ways to justify their existence to whichever bank comes next after WF dumps them.
IMO the biggest problem with Bilt is that they try to attract people who transfer points by having transfer partners like AA (formerly) or AS or Hyatt or whatever but those customers are often much more aware of their credit card habits.
There we go. I was wondering when this story would appear.
I definitely took it as a dig at Wells Fargo.
I rent my apartment, and my building changed over to Bilt earlier in the year. I now have three options for paying rent: use a credit card and pay the crazy fee, get the Bbilt credit card that I dont want or need to avoid the crazy fee, or send my check to the landlord like I used to.
I don't get what Bilt gives me. Points that collect slowly and don't seem to be worth much.
South Park: Step 1. Collect underpants. Step 2. ???????? Step 3. Profit.
For the vast majority of rent-paying US residents, rent is their single most expensive payment per month (typically by a large margin), and it is usually a payment that has to be made via check/direct or utilizing a CC with a fee so high it negates the point yield (excluding some situations when you're trying to make a sign-up bonus, but that's hardly a sustainable year-round strategy)
So... instead of getting *nothing* for a relatively...
For the vast majority of rent-paying US residents, rent is their single most expensive payment per month (typically by a large margin), and it is usually a payment that has to be made via check/direct or utilizing a CC with a fee so high it negates the point yield (excluding some situations when you're trying to make a sign-up bonus, but that's hardly a sustainable year-round strategy)
So... instead of getting *nothing* for a relatively huge yearly expenditure, people how have the opportunity to get 12-36k points per year for purchases they have to make regardless, on a card without an annual fee. Seems like a great deal to me.
Sometimes it seems like certain OMAAT's commenters are in such elevated tax brackets they forget that most people aren't dropping 5-6k per month of credit card spend. Therefore, outside of sign-up bonuses, categories like Rent/Mortgage are a big contributor to overall points earning opportunities.
As a Ph.D. student I only get a livable stipend and rent is my biggest expense. I'm into points and miles but between charging rent to Bilt, using Bilt for 3x points dining (my second biggest expense), and even booking trips/charging airfare to bilt on the 1st of the month (for 4x points since I don't have AMEX Platinum) means I can pretty much funnel most of my expenses to the Bilt card and the...
As a Ph.D. student I only get a livable stipend and rent is my biggest expense. I'm into points and miles but between charging rent to Bilt, using Bilt for 3x points dining (my second biggest expense), and even booking trips/charging airfare to bilt on the 1st of the month (for 4x points since I don't have AMEX Platinum) means I can pretty much funnel most of my expenses to the Bilt card and the points start adding up quickly (as quick as they can for someone on a very limited stipend)
If you don’t want the bilt card why are you even here posting?
Bilt points don’t seem to be worth much? Are u having a laugh?? Clearly uninformed.
BILT’S business model can be summarized as:
Get the idiots at Wells Fargo to agree to a ridiculously bad deal (for WF).
Profit (while we can).