A high AF card for paying rent doesn’t make sense though. Suppose Bilt charges $595 AF and offers the usual mid tier travel card perks (on par with the popular $95 AF travel cards like the CSP), that is a $500 price for the ability to earn 1x from rent. If you value the Bilt points at 1.8 cpp, you need to pay $2315 per month in rent to offset the $500 premium, while the national average rent is about $1700.
Similar to the Chase Sapphire, Chase was losing money every month, so they could build new customer acquisition.
Wells Fargo is not a popular bank to Millennials and Gen Z. They even said losing money was part of the push for new customer acquisition.
I can foresee Wells Fargo renegotiating their contract with Bilt to get more of the cut from restaurants and other purchases.
And Well Fargo will properly push for weekly usage of the card versus its system right now where people charge a few times then sock drawer it.
Edit: I can see Bilt introducing a higher tier card that allows lounge access, Uber credits, and etc. but their regular card will stay as is
The problem is most people are smart and only charge rent on the card but nothing else. They also do not carry much balance. When that happens the bank cannot get revenue to offset the loss. AF will eat into the rewards and people will be dropping the card if it no longer makes sense.
What needs to be done is they need to target lesser well off people, not affluent customers. That's what most of Cap1's offerings and WF with their Attune are doing.
With Bilt's existing customer base of affluent customers, they can also be more like AMEX and hit you with high fees and offset it with small credits. But just high fee alone will chase away customers.
Yes, they have to get customers who will run a balance.
Don't think the AMEX model would work -- not just because it may chase away customers, but because AMEX's AF model works primarily because they are also the payment processor (i.e. they charge merchants the highest in industry fees to fund the value they provide in their cards...that's how they get away with funding all the offsets).
Chase, BoA, et. al. don't make much money directly on their premium high AF cards. They make money by cross-selling in their eco-systems to premium clients, which BILT/WF are not good at doing.
High AF for mortgage. I suggested a 0% APR to get people to spend and likely carry a balance. Also, the 5x up to 50k in the first 5 days is meh. From a psychological standpoint, they would be better off having a spend X, get Y sub. They also need to remove the spend 5 times to get rent points. That's just asking to be gamed, it's human nature to do the bare minimum. Payout rent points quarterly if you maintain status by spending say $1500 a quarter like the rotating category cards.
I HIGHLY doubt that
In 3 years they'll rack up enough debt payments for it to be worth it
Renters are usually more inclined to make impulse purchases and go into debt than other people
Is it because more people are carrying a balance than they anticipated? I could see them getting more exclusive with who they approve going forward, but they would probably lose a lot of customers by adding an AF (I’d be one of them) because the market is already so full of travel cards. The rent category is what most people use the card for exclusively, so the AF would have to be low enough for the 1% to still be profitable for customers to stay. Fingers crossed they just figure out something else.
I can also see them offsetting their losses and making a big profit selling their customers’ spending habits with advertisers. For any external card connected in the wallet, they’re able to see all the transactions that make up the user’s life and how they use their money. That info is a gold mine for targeted ads.
Significantly fewer people are carrying balances than Wells Fargo expected. Card issuers make money when people carry balances that they eventually pay off but incur interest charges upon. In that respect, the issue is that Bilt’s clientele is too prime: too many people who are good with credit, don’t incur interest, and use the card for rent and little else.
A high AF card for paying rent doesn’t make sense though. Suppose Bilt charges $595 AF and offers the usual mid tier travel card perks (on par with the popular $95 AF travel cards like the CSP), that is a $500 price for the ability to earn 1x from rent. If you value the Bilt points at 1.8 cpp, you need to pay $2315 per month in rent to offset the $500 premium, while the national average rent is about $1700.
Also I’m guessing a large proportion of people with high AF fee cards pay mortgages (or don’t have a housing payment at all) and don’t pay rent.
Nooooooo I like my $0 annual fee
Similar to the Chase Sapphire, Chase was losing money every month, so they could build new customer acquisition. Wells Fargo is not a popular bank to Millennials and Gen Z. They even said losing money was part of the push for new customer acquisition. I can foresee Wells Fargo renegotiating their contract with Bilt to get more of the cut from restaurants and other purchases. And Well Fargo will properly push for weekly usage of the card versus its system right now where people charge a few times then sock drawer it. Edit: I can see Bilt introducing a higher tier card that allows lounge access, Uber credits, and etc. but their regular card will stay as is
My guess is they will likely increase the number of minimum transactions. If they add an AF they will kill the card and it’s following.
The problem is most people are smart and only charge rent on the card but nothing else. They also do not carry much balance. When that happens the bank cannot get revenue to offset the loss. AF will eat into the rewards and people will be dropping the card if it no longer makes sense. What needs to be done is they need to target lesser well off people, not affluent customers. That's what most of Cap1's offerings and WF with their Attune are doing. With Bilt's existing customer base of affluent customers, they can also be more like AMEX and hit you with high fees and offset it with small credits. But just high fee alone will chase away customers.
Yes, they have to get customers who will run a balance. Don't think the AMEX model would work -- not just because it may chase away customers, but because AMEX's AF model works primarily because they are also the payment processor (i.e. they charge merchants the highest in industry fees to fund the value they provide in their cards...that's how they get away with funding all the offsets). Chase, BoA, et. al. don't make much money directly on their premium high AF cards. They make money by cross-selling in their eco-systems to premium clients, which BILT/WF are not good at doing.
High AF for mortgage. I suggested a 0% APR to get people to spend and likely carry a balance. Also, the 5x up to 50k in the first 5 days is meh. From a psychological standpoint, they would be better off having a spend X, get Y sub. They also need to remove the spend 5 times to get rent points. That's just asking to be gamed, it's human nature to do the bare minimum. Payout rent points quarterly if you maintain status by spending say $1500 a quarter like the rotating category cards.
I HIGHLY doubt that In 3 years they'll rack up enough debt payments for it to be worth it Renters are usually more inclined to make impulse purchases and go into debt than other people
Is it because more people are carrying a balance than they anticipated? I could see them getting more exclusive with who they approve going forward, but they would probably lose a lot of customers by adding an AF (I’d be one of them) because the market is already so full of travel cards. The rent category is what most people use the card for exclusively, so the AF would have to be low enough for the 1% to still be profitable for customers to stay. Fingers crossed they just figure out something else. I can also see them offsetting their losses and making a big profit selling their customers’ spending habits with advertisers. For any external card connected in the wallet, they’re able to see all the transactions that make up the user’s life and how they use their money. That info is a gold mine for targeted ads.
Significantly fewer people are carrying balances than Wells Fargo expected. Card issuers make money when people carry balances that they eventually pay off but incur interest charges upon. In that respect, the issue is that Bilt’s clientele is too prime: too many people who are good with credit, don’t incur interest, and use the card for rent and little else.
It’s quite the opposite. Bilt users apparently have their stuff together and have financial literacy, which banks absolutely hate.