Savvy Americans have found a huge loophole with a rewards credit card – should you get one before they ditch it?
Americans are plundering Wells Fargo’s coffers for millions by signing up for the first-ever credit card focused entirely on paying your rent.
Wells and startup Bilt launched the Bilt Mastercard in 2022, a rewards credit card that attracted more than 1 million new accounts in its first 18 months.
The Bilt card allows users to pay their rent without their landlord passing on the 2 to 3 percent transaction costs to them.
Their rental payment also qualifies for points — one for every 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.
Typically, some credit card customers carry their balance from month to month, meaning they have to pay interest to the bank.
But the customers who opted for the Bilt Mastercard are smarter than most others.
They don’t track their balances to the extent that executives expected, and so Wells is losing up to $10 million a month on the program. Wall Street Journal reported.
Wells Fargo is reportedly losing up to $10 million a month on its partnership with Bilt Mastercard, which closed in 2022
Credit card issuers make most of their money from the interest they charge when their customers don’t pay off the full balance at the end of the month.
However, initial reports indicate that Bilt cardholders pay off their card each month, as they mainly use it for rent. In this way, they save free points for expenses that would otherwise be mandatory.
Wells expected that 65 percent of purchases on the card before launch would be non-rental. The reality turned out to be quite the opposite.
The prediction was a major blow to the bank, as under the current deal Wells will have to pay a large portion of the transaction fees that tenants normally have to pay themselves.
The San Francisco bank also pays its partner Bilt a fee of approximately 0.8 percent per rental transaction.
And although Wells charges fees every time someone uses their card for anything other than rent, Wells shares those fees with Bilt.
Finally, Bilt receives $200 from the bank every time someone opens a new account.
It increasingly appears that this deal is much more favorable for Bilt and its CEO Ankur Jain, who has become a billionaire thanks to the collaboration.
Wells told the Journal that such dual branding is a “modest part” of its credit card business.
“As with all new card launches, it takes several years for the initial launch to pay off,” a spokeswoman for the bank said. “We look forward to continuing to work together to… ensure it’s a win for both Bilt and Wells Fargo.”
Bilt responded even more sharply to the shocking article, saying the Journal’s reporting was “an incorrect representation” of the partnership.
Behind the scenes, Wells is said to have told Bilt that cardholders are not paying nearly enough interest to ever make this profitable.
Meanwhile, Bilt is angry because the bank is replacing the marketing of the Bilt card in Wells Fargo branches with its own credit cards.
Bilt’s story began in 2019, when Jain founded the company. His mission was to find a banking partner who could issue the first credit card, as his company was unable to borrow money on its own.
Major lenders such as US Bancorp and Synchrony Financial ignored Jain’s pitch. He even spoke to JPMorgan Chase about a possible partnership.
When Jain presented his rental card proposal to Wells, some employees apparently found the idea ridiculous.
But at that time, Charlie Scharf was the CEO, and one of his main goals was to revitalize the company’s credit card offerings.
The idea was that they could attract younger customers who were currently renting, but would like to take out a mortgage in the future.
The rewards can be used to book travel
The Bilt Mastercard offers 3x points on dining, 2x points on travel and 1x points on rent. Although data shows that more than half of its transaction volume is dedicated to rent, where Wells Fargo makes the least money
Wells Fargo CEO Charlie Scharf, left, signed off on the Bilt deal in hopes of revitalizing the bank’s credit card offerings and eventually leading to more mortgages. Bilt Technologies CEO Ankur Jain has since become a billionaire thanks to the partnership
Bilt is angry that the bank is replacing the marketing of the Bilt card in Wells Fargo branches with its own credit cards.
If Wells were the one behind the popular Bilt card, cardholders might choose this card as their preferred mortgage lender going forward.
The bank’s reputation was also at stake when it emerged that a long-standing fraudulent practice had involved the company’s employees opening millions of unauthorized bank accounts to meet unrealistic sales targets.
Wells agreed in 2020 to pay a $3 billion fine for this behavior.
If no major changes occur, the bank has reportedly informed Bilt that it will not renew the contract for the card, which expires in 2029.
That means Americans have about five years left to sign up for the card, which has become popular among travel-loving apartment dwellers.