Wells Fargo Losing $10 Million Every Month with Bilt Partnership

Wells Fargo Losing Millions with Bilt Partnership

Wells Fargo and Bilt Technologies launched a co-branded card in 2022. The Bilt Mastercard offered a unique perk. Cardholders can pay their rent with no fees, and they can earn rewards points while doing so. 

The card doesn’t have an official signup bonus, so most people who apply do so in order to earn points on rent payments. If you pay $3,000 in rent every month for example, you can earn up to 36,000 Bilt Points every month at no cost to you. And if your rent is higher, you can earn up to 100,000 points every year. 

That seems like a great for cardholders, as they can generate free points. And those points are quite valuable, as Bilt Rewards is also a good program with popular transfer partners like World of Hyatt. So who foots the bill for all these free rewards? Apparently it’s Wells Fargo.

Partnership Details

A WSJ article reveals many details of the partnership between Wells Fargo and Bilt. Here are some things worth highlighting:

• Wells Fargo is losing as much as $10 million every month on the program as savvy customers flock to the card.
• Bilt structured the card so landlords won’t incur the fees. Wells instead eats much of that.
• About six months after the credit card was launched, Wells Fargo began paying Bilt a fee of about 0.80% of each rent transaction, even though the bank isn’t collecting interchange fees from landlords.
• Wells Fargo pays Bilt $200 each time a new card account is issued.
• Wells Fargo has invested at least $20 million in Bilt, according to people familiar with the matter, an unusual arrangement in the world of credit cards.

Flawed Assumption

So why did Wells Fargo agree to this? They made some bad assumptions:

• Wells Fargo assumed around 65% of card-purchase volume would be nonrent, which would interchange-fee revenue and make up for those free rent payments. The reality is inverted and apparently that 5 monthly purchases requirement is not doing much.
• The bank expected that 50% to 75% of purchases would carry over from month to month, generating interest charges. The reality ranges between around 15% and 25%. Many customers would pay their rent off within a few days of charging it to their cards.

WSJ reports that these “financial losses triggered a renegotiation of the program that has been under way for months. Wells has told Bilt that it doesn’t intend to renew the contract, which is scheduled to end in 2029, unless economics are changed in its favor.”

Good Card for Those with Hight Rent

I have the Bilt Mastercard myself, and I think it is a good product that earns valuable rewards. But I use it to pay my rent, and for small dining purchases throughout the month with the occasional big dinner if it fall on Rent Day. That’s when all earning on the card is doubled. 

The program also used to have some great transfer bonuses that made points even more valuable. But those offers seem to have dried up in recent months, and that could be related to what is described above.

The agreement with Wells Fargo runs through 2029. So you can still use the card, earn points, and transfer those points to partners to maximize value. And if you don’t have the card, you can apply and earn an unofficial bonus of 5x points on all eligible purchases for the first five days, up to a maximum of 50,000 bonus points.

But if you often chase high signup bonuses, even that unofficial offer doesn’t rank very highly. You have much better options.

CEO’s Reply

Ankur Jain, the founder and CEO of Bilt Rewards, has commented on the article, painting a different picture. He notes that Wells Fargo has stated that ” there has been no conversation among decision makers to exit the BILT agreement”.

He also says that “Bilt is a loyalty network driving spend between local residents and merchants. 85% of our members use Bilt’s platform with their other linked Amex/Visa/Maatercards. And while less than <15% of our members are Wells Fargo cobrand credit cardholders, we are excited and committed to our partnership with Wells.

Ankur Jain notes that the partnership has resulted in 70% of Bilt cardholders being new customers to WF. They have an average age of 31 and average FICO score of 760, which means they are highly valuable customers.