Wells Fargo may have underestimated just how savvy millennial credit card holders can be

• Bilt Rewards, a Wells Fargo co-branded credit card, allows people to earn rewards by paying rent.
• Bilt's core demographic are high-earning young professionals.
• The company may have miscalculated how its customer base would use its card. 

Wells Fargo may have underestimated just how savvy young professionals could be with a credit card that rewards renters.

In 2022, Wells Fargo, the San Francisco-based bank, partnered with Bilt Technologies, a fintech startup, to offer a rewards program that incentivizes customers to pay rent with a credit card.

For many young renters, the allure was clear: Bilt offered a zero-annual-fee card that allowed its users to earn a point for every dollar spent on rent without incurring transaction fees. The only requirement was that customers make five transactions each statement period to earn the points.

Customers could also receive points for travel and dining. Those points could then be used for purchases with any of Bilt's partners, such as Alaska Airlines, Virgin Atlantic, Hyatt, and Soul Cycle.

According to The Wall Street Journal, Bilt opened more than one million accounts within the first 18 months.

But the return for the bank has yet to materialize.

A 'generation of young, affluent new customers'

Bilt's demographic is decidedly different from the average American — who has a median salary of just less than $60,000, with 49% of them holding onto a credit card balance month-to-month.

But a report on Bilt prepared by investment banking firm Financial Technology Partners said the company was reaching out to a "generation of young, affluent new customers."

In a February interview with The Wise Marketer, Dave Canty, Bilt's head of loyalty and partnerships, said the company's core demographics are between 24 and 34, with a median age of about 29.

"The average income," he said in the interview, "is about $147,000, so these are high-achieving young professionals."

Bilt CEO and founder Ankur Jain said on X that his company was attracting "highly valuable customers" for Wells Fargo at low costs. The average customer is 31 years old and has a 760 FICO score, he said.

Kevin and Amanda Smidt, a Miami-based couple, told Business Insider they've been Bilt cardmembers for about a year after they heard about the program on a financial podcast.

"I've never heard of it, and I was like, 'Wow, that's so smart,' because — especially if you live in a major city like New York or Miami — you're spending a lot of money on rent," Amanda, a 32-year-old business owner and registered nurse anesthetist, said. "I was like, 'This makes so much sense because I have this huge payment every month, but now I'll get points.'"

The two described themselves as financially responsible, telling BI they never carry a balance on their multiple personal credit cards, including Bilt.

"I heard about it on a financial podcast about investing. I'm a responsible person who invests, you know what I mean?" Amanda said.

Kevin, who is 33 and working on his fellowship as an orthopedic surgeon, told BI that the card has been fruitful.

The couple said they racked up 56,000 points in about six months and transferred them through one of Bilt's programs to turn their earnings into 126,000 points with Virgin Atlantic. Kevin said they used the reward to pay for three flights, two in business class and one on Virgin's new plane.

The husband told BI that he could see the card being beneficial for general use, given the rewards a customer could gain from travel and dining. But for the Smidts, most of the other purchases they made with Bilt were to meet the minimum five-transaction requirement.

"A lot of the times, that's like a latte," Amanda said. "I just do small purchases to be able to get the points from the rent."

Kevin said he hopes Wells Fargo doesn't get rid of Bilt, but Amanda chimed in: "Well, actually, we just bought a house."

"Oh yeah," Kevin added, "so we won't be able to use it anymore."

A costly program

The Journal reported on Sunday that Wells Fargo was losing up to $10 million monthly to sustain the Bilt program, citing anonymous current and former employees.

According to the report, part of the problem is that Wells Fargo may have miscalculated how Bilt customers would use the card.

The Journal reported that only 15% to 25% of the dollars people spent on the card were carried over month-to-month, which is crucial for Wells Fargo to generate interest-fee revenue. The bank projected that the carry-over would be between half and three-quarters of the dollars spent.

Wells Fargo also anticipated that 65% of the credit card purchase volume would be for expenses other than rent. Instead, according to The Journal, most purchases are for rent payments despite Bilt's requirement for five transactions per statement to score points.

Wells Fargo and Bilt declined to comment on the reported numbers. A Bilt spokesperson told Business Insider that Wells Fargo does not make the numbers publicly available.

In an email, a Wells Fargo spokesperson told Business Insider that co-branded credit cards are "one modest piece of the company's overall credit card business strategy, and the BILT credit card is one component of that."

"As with all new card launches, it takes multiple years for the initial launch to pay off and while we are in the early stages of our partnership, we look forward to continuing to work together to deliver a great value for our customers and make sure it's a win for both BILT and Wells Fargo," the spokesperson said.

According to The Journal, the losses have pushed Wells Fargo to rethink its partnership with Bilt, and the bank won't renew its contract, which is set to expire in 2029.

The Wells Fargo spokesperson said that "there has been no conversation among decision-makers to exit the BILT agreement. To suggest otherwise is false."

A Bilt spokesperson said the Journal's story is an "inaccurate representation of our strategic partnership with Wells Fargo."

On X, Bilt CEO Jain did not address the reported losses but repeated Wells Fargo's statement denying the bank's plan to end the partnership once the contract expires.