Startup Launches Credit Card to Save for Down Payment

A real estate startup wants to help renters become homeowners. Bilt Technologies has teamed with Evolve Bank & Trust and Mastercard to launch a credit card that enables cardholders to accumulate reward points through rent and other spending, with no fees charged to the tenant or the landlord when paying rent on the card.

Rewards points can then be put toward rent and other purchases, even toward a down payment on a house. “We believe paying rent should build your credit score because it’s your single largest liability,” said Ankur Jain, founder of Bilt.

Many landlords already accept credit cards, but they typically pass on processing fees to renters, typically totaling 3%. For landlords that don’t accept plastic, Bilt says it will mail landlords paper checks on behalf of the tenant, then charge the renter’s credit-card account, with no fee.

The partnership can afford to offer no-fee rent payments because of the processing fees that Evolve and Mastercard will collect from the users other transactions. The card program attempts to incentivize this type of non-rent spending by increasing the rewards for rent when cardholders spend more on everything else.

Unlike homeowners, who build equity with every monthly mortgage payment, renters get no long-term benefits from their monthly payments. Paying by credit card gives renters some additional value that could help them buy a house, Bilt says.

Paying by credit card also helps renters improve their credit scores, as Bilt reports users on-time rent payments to the bureaus for you to help boost your credit score. According to a recent Transunion report, rent reporting can boost credit scores by as much as 26 points.

If the cardholder decides one day to use their points for a down payment on a home, Bilt says it will convert reward points into cash and deposit the money into an escrow account. “It should be a path to homeownership,” Jain told the Journal.

It will take time to accumulate enough points to make a sizable down payment. A cardholder who spends about $1,500 on monthly rent for 10 years would accumulate enough points for a $6,000 down payment. However, tenants using any credit card to pay rent need to be careful. Credit cards usually come with high interest rates: The Bilt card, for instance, has an interest rate of between 15% and 22.5%.

Bilt hopes to avoid letting the card become a debt trap through a tool that disables rent payments when users don’t have sufficient cash savings in a linked bank account. Card users deemed higher risk will be required to use the feature. For other users, rent still has to be paid off within one month and no interest will be collected on rent spending, according to Bilt.

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