Americans are draining millions of dollars from Wells Fargo’s coffers by applying for the first credit card specifically designed to pay rent.
Wells and his startup, Built, launched the Built Mastercard in 2022, a rewards-earning credit card that has attracted more than 1 million new accounts in the first 18 months.
The Bilt card allows users to pay rent without landlords charging them a 2-3 percent transaction fee.
You can also earn points for every dollar you spend on rent, which you can later use to book flights, hotels, rental cars, or transfer to travel partners like American Airlines, Air France, and Marriott Bonvoy.
Typically, some credit card customers carry their balances over from month to month, which means they have to pay interest to the bank.
But customers who buy the Built MasterCard are smarter than most.
Wells has not been building up its balance as fast as executives had expected, and the program is losing as much as $10 million a month. The Wall Street Journal report.
Wells Fargo is reportedly losing up to $10 million a month on its Built Mastercard partnership, which was signed in 2022.
Credit card issuers make most of their revenue from the interest they charge customers when they don’t pay their balance in full by the end of the month.
But early reports suggest that BuiltCard users primarily use the card to pay rent, so they pay it off each month, thereby accumulating free points for what would otherwise be a necessary expense.
Before the card’s launch, Wells predicted that 65% of purchases on the card would be non-rentals, but the reality has been the opposite.
This wildly inaccurate forecast was a major blow to Wells because, under the current agreement, the bank will bear many of the transaction fees that are normally paid by tenants.
The San Francisco-based bank pays its partner Built Bank a fee of about 0.8% per rental transaction.
Wells takes a fee each time the card is used for a non-rent payment, but shares that profit with Built.
Finally, every time someone opens a new account, Bilt receives $200 from the bank.
The deal is looking more lucrative for Built and its CEO, Ankur Jain, who has become a billionaire thanks to the partnership.
Wells told The Wall Street Journal that dual branding like this is a “modest part” of the company’s credit-card business.
“As with all new card launches, it will take several years before the initial launch is profitable,” a spokesman for the bank said. “We look forward to continuing to work together to ensure this is a win for both Built and Wells Fargo.”
Bild issued a harsher response to the shocking article, saying the Wall Street Journal report “inaccurately portrayed” the partnership.
Behind the scenes, Wells has reportedly told Built that the interest paid by cardholders simply isn’t enough to make the business profitable.
Meanwhile, Built Bank is upset that the bank has replaced marketing of Built Bank cards in Wells Fargo branches with its own credit cards.
The Built story began in 2019 when Jain founded the company. His mission was to find a banking partner to issue its first credit card, as he was unable to provide lending on his own.
Other big lenders, including U.S. Bancorp and Synchrony Financial Inc., turned down offers from Mr. Jain, who also spoke with JPMorgan Chase & Co. about a possible collaboration.
When Jain approached Wells with his proposal for a rent-based card, some employees thought the idea was crazy.
But Charlie Scharf was CEO at the time, and one of his main goals was to revitalize the company’s credit card services.
The idea was to attract younger customers who were renting for now but wanted to take out a mortgage in the future.
Rewards can be used to book travel
The Built Mastercard offers 3x points on dining, 2x points on travel, and 1x points on rent. But data shows that more than half of transaction volume is spent on rent, and Wells Fargo has the least margin on rent.
Wells Fargo CEO Charlie Scharf (left) signed the deal with Built to revitalize the bank’s credit card offerings and hopefully lead to more mortgages in the future. Built Technologies CEO Ankur Jain became a billionaire thanks to the partnership.
Built Bank is upset that Wells Fargo has replaced its marketing of the Built Card in branches with the bank’s own credit card.
If Wells is behind the popular Built Card, perhaps cardholders will choose Wells as their preferred mortgage lender in the future.
At the time, the bank’s reputation was under threat after it admitted to years of misconduct in which employees opened millions of unauthorized bank accounts to meet unrealistic sales targets.
Wells agreed to pay a $3 billion fine for the practice in 2020.
The bank has reportedly told Bild that it will not renew its card contract, which is due to expire in 2029, unless there is a significant improvement in the situation.
That means Americans have about five years left to apply for the card, which has become a favorite among apartment dwellers who love to travel.
