Using Frequent Miler’s Valuation Method, The Bilt Palladium Card Is The Most Valuable Card They Have Ever Seen, Even With Zero Housing Spend

by Andrew Chalk

Actually, this is an unofficial attempt to use the Frequent Miler (FM) method to get what they call their “first year value” of the Bilt Palladium Card. We find that the first year value is $3,149, exceeding even the value of the former leader, the American Express Platinum Card, at $2,630. However, redeeming every bit of this value requires a spend of roughly $35,788 during the year in order to generate enough of the internal currency known as Bilt Cash (hereinafter B$) to use the offers on the Bilt card. But that level of spend is not materially different from that required to support spend on the AMEX Platinum or the card below it, by some distance, the Chase Sapphire Reserve, which was worth only $1544 in FM first year benefits.  

In order to simplify the valuation of the Bilt Palladium Card we omit from our calculations any value derived from rent or mortgage. 

How Is First Year Value of a Card Calculated?

The FM method for calculating the first year value of a card is described in the link above. It can be basically summarised as this sum:

Sign-up bonus

plus Value of ‘selected perks’ 

minus Annual fee

minus opportunity cost of meeting the minimum spend.

The simplest card to explain this for is the bare-bones Capital One Venture Card.

1. The Sign-up bonus is 75k points after $4k of spend. FM values a Capital One point at 1.45c, as a result of its partner transferability, so this bonus is worth $1087.50;

2. The only selected perk is a $250 travel credit, which FM values at only $220 as a travel credit is not as liquid as cash;

3. The annual fee is $95;

4. The opportunity cost of spend is $8;

Adding these values gives us: $1204.5 (1087.5 + 220 - 95 - 8), which we round to $1205. 

In the article referenced in the link, FM provides a useful example (the Bank of America Premium Rewards Elite card) that shows that real-world examples get more complicated than the Capital One Venture card when they add more selected perks. 

A somewhat arbitrary choice must be made as to what rewards to value in the first year valuation. One basically must look at each item offered and decide if it is dealt with in the general criteria or if it corresponds to an item in the BoA example. The pre-Bilt best-value card, AMEX Platinum, is more complicated, as shown in Figure 1.

FIGURE 1 FIRST YEAR VALUE OF THE AMEX PLATINUM CARD FM CALCULATION METHOD
ITEM	VALUE ($)
Startup Bonus (175,000 miles)	2625
Airline Incrementals	140
Resy credit	85
Uber credit	100
Uber One credit	48
Saks credit	25
FHR credit	300
Digital entertainment credit	150
Lululemon	150
Cost of Spend	-192
Annual Fee	-895
Fudge factor	94
TOTAL	2630

Note: My total was off by $94 (3.5%) so I assumed the user had a sweet tooth (fudge factor).

Applying The Frequent Miler Valuation Methodology To The Bilt Palladium Card

Moving from bare-bones reward cards like Capital One Venture to high-end cards like AMEX Platinum or Chase Sapphire is fairly easy with the FM first year valuation methodology. The difference between Capital One Venture and the others is more items to redeem in the ‘selected items’ category, as the calculations above illustrate. Unsurprisingly, the high-end cards have become known as ‘coupon books’.

The Bilt card started with a completely different philosophy from other cards. Based partly on its Bilt 1.0 history, and partly on its fintech provenance, it adopted different paths to becoming the premier rewards credit card. 

The Bilt 1.0 history was as a rent card. That was its raison d’être. It let the user pay his rent without paying the usual interchange fee (typically 3%). That nailed down an audience to market to and supplemented Bilt’s rental payment software.    

Its issuer, Wells Fargo, soured on the deal after they found users did not use the card for much else, or run a balance. The underlying problem was that every credit card has a spend incentive system built into its rules, and Bilt’s did not incentivize either non-rent, or ongoing spend. Wells Fargo was sufficiently disillusioned as to pull out of the contract early, and the Bilt 1.0 rent model apparently could not attract any of the other major credit card issuers. 

Bilt 2.0 was an attempt to address this. The Bilt 2.0 rent model cleverly disincentivizes the non-spenders from upgrading, adds mortgage payers to the catchment clientele, and makes paying rent or mortgage fee-free so long as you spend enough with the card on other things. In an attempt to clarify the concepts it came up with a private currency, Bilt Cash (B$). 

The B$ idea may have backfired and made understanding the rent model more difficult. Therefore, in this article, we completely ignore Bilt’s rent and mortgage earning models and focus on the Bilt Palladium card solely as a coupon book. A future article will attempt to incorporate the rent model.

Bilt Palladium as a Coupon Book

So, Bilt 2.0 also goes the way of the coupon book. However, to control this it does not let users spend on coupons directly with dollars. Users can only get credits with B$. Bilt controls these by limiting their acquisition to: spending (the most important way), a timeline bonus of B$50 for each 25,000 Bilt points earned, and other promotions (for example, the sign-up bonus is 300B$, the annual renewal bonus is 200B$).

Examples of these coupon book rewards are listed in Figure 2

FIGURE 2

A SUMMARY OF BILT COUPON BOOK CREDITS

TRAVEL AND TRANSPORTATION

Hotel $1,200/yr

Lyft $120/yr.

Blacklane  $100/yr

Blade  $700/yr.

Priority Pass extra guests  $840/yr 

Parking  $60/yr

HEALTH AND WELLNESS

Fitness Class  $480/yr

Walgreens  $120/yr

OTHER

Comedy Experiences  $600/yr

Bilt Design  $120/yr

DINING

Grubhub $120/yr

Gopuff $60/yr

Gopuff fam $100/yr

Dining $300/yr

Dining Experience $600/yr

You redeem these credits slightly differently from conventional coupon book credit cards. 

To redeem a credit with the conventional coupon book you take dollars, spend them on a product or service (for example, food delivery) and pay with the card, which gives you a credit. 

With Bilt rewards you have to redeem credits with previously acquired B$. You use the Bilt app or website to order the product or service and pay with B$. 

So, Bilt rewards are not so different from conventional card coupon book rewards. In Figure 3 we list Bilt rewards and deflate them using the same deflation factors used by Frequent Miler in valuing the Amex Platinum card, or the values in their instructional article referenced above.

FIGURE 3 FIRST YEAR VALUE OF THE BILT PALLADIUM CARD Assumes a Gold status Bilt user. Deflation percentages are the same as the FM deflations for the AMEX Platinum Card.
REWARD NAME	VALUE ($)
Welcome Bonus (50,000 miles * 1.55c/100)	775
Accelerator (25,000 miles * 1.55c/100)	387.5
Bilt Cash Milestone Award	50
TRAVEL AND TRANSPORTATION
Travel Credit (Hotel credit) $400 /yr	352
Hotel credit $1,200/yr	900
Lift $120/yr.	96
Parking $60/yr	53
HEALTH AND WELLNESS
Fitness Classes $480/yr	384
Walgreens $120/yr	96
DINING
Grubhub $120/yr	96
Gopuff $60/yr	48
Gopuff fam $100/yr	80
Dining $300/yr	264
Cost of Spend	62
Annual Fee	-495
TOTAL	3148.50

Comments

The FM valuation of Bilt points is 1.55c/point, the highest of any reward currency.

The accelerator is a Bilt feature under which the reward rate on the Palladium card is increased by 1 point per dollar for the next 5,000 dollars spent. It costs 200B$. It can be exercised up to five times per year, making its value 25,000 points in the first year.

Note the following interesting quirk. The cost of spend is negative (it is a credit to the value of the card). This is because the return on the $4,000 required to get the start up bonus is higher than that on the FM reference credit card.  

Omitted from eligible first year benefits (and this is certainly my judgement call, on which I am willing to be persuaded) are: Housing, Home Away From Home, Rent Day Specials, Unlock Higher Transfer Bonuses, Blacklane, Blade, Comedy Experiences, Bilt Design, Dining Experiences, Priority Pass extra guests. 

Summary

The Bilt Palladium Card is the richest card in terms of rewards, even ignoring its return on rent or mortgage, and by a wide margin. The key thing to realise is that the redemption of its rewards requires Bilt cash, either from prior spend or an offer. This internal currency is self-generating with spend. This is not fundamentally different from conventional cards that use ordinary dollars to redeem rewards. Both, ultimately, require dollar spend.