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Here’s a simple look at the economics of the Bilt Palladium Card (See rates and fees). Interchange alone cannot fund earning 3 Bilt Points or more per dollar when those points are transferred to Hyatt or to Japan Airlines with a big transfer bonus. And that’s especially true for someone spending a lot on their card, because when they maximize housing spend to earn more points they wind up overwhelming the economics of the big annual fee.
A 2x earn card in significant bonus categories is going to be profitable. A premium annual fee card that earns 2x on all spend can be profitable. We’ve seen lounge access cutbacks from Capital One Venture X, including for Priority Pass access. Palladium’s lounge access is more generous. But comparing economics of Venture X and Bilt,
- Bilt has more expensive transfer partners. Capital One transfers to JAL, like Bilt does, but Capital One’s transfers are not 1:1. Capital One doesn’t transfer to Alaska or Hyatt.
- But Bilt also has plenty of low value redemptions, like Amazon and rent payments. The more people who use these, the more sustainable the high value redemptions are. But that doesn’t change the economics that they lose money on those who maximize the card on the earn side and who redeem for Hyatt, or for JAL with a 125% bonus.
Bilt’s transfer bonuses probably make this even more expensive. While I believe that, in general, Amex transfer partners eat the cost or at least a portion of the cost of transfer bonuses (though not always) I don’t know the terms under which Bilt’s frequent Rent Day transfer bonuses up to 125% are funded. Bilt has to be paying for a significant portion of those, at least much of the time.
On the other hand, Bilt doesn’t have its own airport lounge network to pay for. And Bilt’s travel credit has more favorable economics than Chase’s and Capital One’s. Bilt gives two $200 hotel booking credits on a minimum two-night stay, to be used once in the first half and once in the second half of each year.
- Consider a $250 per night hotel. On a two-night stay that’s $500, and they might earn $100 in commission. So each $200 booking credit really costs them $100.
- And there will be a lot of breakage – presumably far more than Chase or Capital One sees, and when you use credits from those other issuers for airfare there’s relatively little commission reducing the cost.
Put another way, Bilt is going to make money on Palladium cardholders who redeem their rewards at 65 basis points against rent or Amazon charges. And they’re going to make money off people who spend the card’s $495 annual fee, earn at 2x, and don’t use the hotel credits (or who use them and then lean into the Bilt portal for all their travel booking). But Bilt’s best Palladium customers will lose them the most money.
- Someone who spends a ton of money on the card – and pays it off each month
- Who uses it for housing payments to boost earning to 3.3 points per dollar (on up to three-quarters of their housing payment)
- Redeems Bilt Cash to turn the card into a 3 points per dollar earning machine. (You want to redeem all your Bilt Cash, only $100 rolls over to the next calendar year.)
- Or who foregoes redeeming Bilt Cash entirely and uses the HELOC trick to make Palladium a 4 points per dollar-earning card on all spending
- And then leans into Bilt’s Rent day activations, redeeming points with (say) a 100% bonus to a program that’s expensive for Bilt to buy points from
- And who redeems their annual hotel credits with maximum value
- Plus activates and uses their card’s Priority Pass, which makes sense because it covers not just the cardmember plus two guests.
That’s an engaged customer! It’s also someone Bilt is losing a lot of money on. The more engaged, the more they spend – as long as they pay their card off each month and don’t revolve – the more that customer is costing Bilt. (They presumably earn something off the float with housing payments but not enough to cover high value points redemptions.)
None of this means Bilt is going to lose money on their credit card overall. It all depends on how their cardmembers use the card. And presumably they know how many people spend points on rent and for Amazon purchases (and made an informed bet on how this would carry over to their new annual fee card portfolio).
Relatedly, I have to imagine that letting points transfer from Rakuten to Bilt is going to be very expensive – I’d be surprised if Rakuten is paying Bilt materially more than they’re American Express for points, and Bilt points can cost a lot more to the program. They’ve said only Bilt Rewards elite members will be able to keep 1:1 transfers from Rakuten, but I’d also imagine that more engaged members with status will be more likely to redeem their points in ways that are more expensive for the program.
Ultimately I absolutely love this. It means I can get tremendous value out of Bilt – and I am, like taking advantage of that 125% Japan Airlines Mileage Bank transfer bonus. My best guess is that this is sustainable, not as a transfer from Bilt’s investors to me (where eventually the music stops) but as a transfer from less savvy members to the most savvy.
Of course, at some point there could be a push to cut costs. Every program eventually looks at their biggest expense lines and sees opportunity in that. I’ve written for nearly 25 years that the best opportunities do not last forever (though sometimes they last longer than you’d expect). So the best strategy to employ is taking advantage of those while they’re around, not getting emotional about it, and moving on to new opportunities when those need to be replaced. I have a feeling though that I’m going to be enjoying my Bilt Palladium card for quite a bit.
As it is I look forward to charges posting to my card, and Bilt Cash posting to my account – and making sure that I stay on top of maximizing my points-earning via housing payments (I actually enjoy paying my mortgage) and noting the exact moment when I’ve finished using Points Accelerator so I can redeem Bilt Cash for it again to earn an extra point per dollar on the next $5,000 in spending.
BILT is FYRE Festival 2026. Will crash and burn. Glad you acknowledge it’s not sustainable. Just don’t be surprised when they pull a Mesa.
On the plus side, Ankur Jain’s wife, Erika Hammond, is joining Real Housewives of New York according to US. Almost a reason to get the BILT card by itself. Well, for me, maybe later.
@Matthew – on the contrary, I think there’s great value to get here – they are likely to lose money on those of us who do. But if they keep having a ton of people redeem points against rent, or borrowing, it works. the point is the subsidy isn’t VC -> consumers, it’s unsavvy consumers -> savvier ones.
@Gary. That is a huge assumption. And yes Milk it for all its worth I don’t disagree. But dont be surprised when it folds/devalues. As we have seen in the points and miles game, when it looks too good to be true it is. I am a fellow Austinite. Let’s reconvene later in the year and see where BILT is at. I fear when they cut these benefits after putting on the HARD marketing sell they will be defending several class action lawsuits. We will see.
@Gary, those “dumb” consumers didn’t seem to be sufficient in number to be able to sustain Bilt in 1.0 without Wells against the 5-banana crowd, did they?
Did you forget the whole 1.0 Wells Fargo sugar-daddy years? Pretty sure venture capital is paying this time around, which is why some of us are a little concerned with longevity. Would much prefer a too-big-to-fail bank as a backer…
@Gary: I suspect those JAL rent-day specials are heavily financed ny JAL as part of broader marketing campaign. Did you notice that Rove had a LAL offer roughly concurrently?
@Matthew: When?
The real question is how do they pay Gary Left all of his referral commission$?
I don’t think you understand their business plan which is to extract significant revenue from driving sales to their partners such as restaurants and hotels for whom the marginal profitability of an incremental customer is enormous (a table or hotel room that would otherwise go unoccupied).
Obviously nobody knows if it will work but the whole points of startups is a business based on something that hasn’t been done before.
Whether you think they’ll be able to pull this off, or not, an analysis of their business that doesn’t include an depth discussion of that revenue stream doesn’t make any sense since that’s intended to be the core driver of their business.
Here’s how Ankur Jain explained it to Fortune…
“That is the entire core of what we are doing: connecting renters with businesses in their neighborhoods. That’s important when you consider 80% of consumer purchases happen within 15 miles of one’s home. Our Neighborhood Benefits program gives members rewards and benefits within our network of local merchants, which in turn helps these local businesses win new customers. These merchants pay us a commission on what users spend which we reinvest in better rewards for our members. This includes exclusive neighborhood experiences like dining and stand-up comedy events. Fueling this ecosystem across America is a key goal.”
The credit card and rent payment will run at a loss. Both are just a means to an end. They talk about commissions but when you dig deeper the company is a bet on their ability to extract outsized commissions from high margin partners by allowing them to monetize assets that would otherwise spoil like unsold event tickets, empty dining tables, etc.
Meanwhile Reddit is FULL of “hey , I have NSF and late fees for trusting Bilt to pay my rent/mortgage” posts.
That’s the kind of thing that gets people to leave an ecosystem, messing with their home.
@Steve,
You’re 100% right about their pitch.
The question is, how much of a loss will / can they tolerate on the CC side in the service of building these other businesses?
Based on their regular shutdown of customers who game them *by their rules*; their exclusion of categories virtually every other issuer tolerates and rewards like taxes/public payments; and their constantly changing rules, my guess is, “not much”. 🙂
I say this as someone who wishes them well, and who’s been on the fence to taking our Palladium preapprovals since before the February 7 launch.
I generally agree with your assessment. On the points side, it seems close to sustainable. I struggle with the Bilt Cash component, though commissions might overwhelm the redemptions that are close to cash value for us. This is true for the VX. Maybe they don’t get good commissions every year, but if they get 20-30% of users to use the portal for a week long vacation stay, that covers a ton of costs (I did once do this because I got a good rate, and I noticed that the commission (accidentally shown to me) nearly covered the $300 credit). I’m sure my Bilt Travel booking for 25% off (with the stacking credits) comes out at a big discount to them. I don’t mind as long as I also get a fair price.
For a long time, Bilt argued that a 2x card was not possible for them. Given how they have integrated everything with Cardless, it seems like they figured out how to make the economics work by reducing overhead and servicing costs that would be a big part of a bank card. But yes, eventually they will want more margin. Maybe that comes from the businesses that we are “sold” to (if they get a big, high consumption customer base, I could see more partners being interested), but it might come in the form of devaluation. Maybe it will be both. For right now, I’m happy with the value I’m getting.
@Larry,
Geez, if the best trolling you can muster is in the t-ball league, at least get the trollee’s name right.
The constant shilling takes a lot of time and effort, so show him a little respect, will ya please?
Remember when Groupon was a big deal?
@Brent, I reckon if anyone can make it work, you can. Thanks for the data point.
Not following “true for the VX”.