Bilt, Affirm make moves amid Trump’s pressure on interest rates | PaymentsSource

• Key insight: Bilt and Affirm are developing products as political pressure mounts on bank-issued credit cards.
• What’s at stake: Consumers who get shut out of credit cards may look for new sources of credit.
• Forward look: Analysts say the odds of the Credit Card Competition Act passing are still low, but gaining momentum.

It’s been less than a week since President Donald Trump called for a 10% cap on credit card interest rates, but new products that can draw consumers away from bank-issued cards are already on the way. 

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Fintech Bilt, which offers credit cards that feature incentive marketing for rent and mortgage payments, this week debuted three new cards with a 10% cap on interest rates for one year — the same term as Trump’s threatened executive order. 

At the same time, buy now/pay later fintech Affirm is preparing to support BNPL for rent through a partnership with fintech Esusu. A proposed cap could make it harder for consumers to qualify for credit cards, pushing them to buy now/pay later lending. In the wake of Trump’s announcement, Affirm’s stock increased early this week while bank stocks declined. 

These moves come as card-issuing banks prepare for potential hits to their revenue due to either a Trump executive order on credit card rates or renewed momentum for the Credit Card Competition Act, which Trump endorsed earlier this week. The CCCA would require bank-issued credit cards to offer merchants at least two credit card network options, at least one of which cannot be Visa or Mastercard.

The president’s endorsement of the CCCA “revives legislative chatter, elevating headwind risk over the next 6-12 months ahead of midterms,” according to a research note on credit card companies from KeyBanc Capital Markets, which adds the odds of the CCCA’s passage are still relatively low, but higher following Trump’s move. 

New products

Bilt’s offer, which applies to new card orders, includes three cards. The Bilt Palladium Card has a $495 annual fee and offers consumers $400 in annual credits redeemable for hotel stays, and $200 in Bilt Cash, or points that can be used at Bilt’s merchant partners. The Bilt Obsidian Card includes rewards on restaurant and grocery payments and has a $95 annual fee. The lowest tier has no no annual fee and offers cash back and points for some payments. 

After the one-year offer, Bilt’s APR reverts to its existing rates, or 26.7% to 34.7% at account opening, or based on the U.S. prime rates. 

Bilt referred questions to the company’s press release. 

“Bilt Card 2.0 offers rewards on your rent, rewards on your mortgage and earns you the most valuable points in the market. We’re not just launching three new cards, we’re rewarding the way people actually live,” Ankur Jain, founder and CEO of Bilt, said in the release. 

The Bilt card model is unique in the credit card industry because it allows users to earn rewards points on rent payments without incurring the typical transaction fees charged by landlords or property management companies, according to a research note from Keefe Bruyette & Woods. “Many consumers use the card for just this use case and therefore use other products for other purchases (that offer better rewards on other purchases) and more competitive APRs for lending,” KBW said. 

Noting that the rates jump after one year, KBW said the new Bilt card is “easier said than done.”

“While this is a news negative for the industry (as it may be used by the administration to demonstrate the feasibility of a 10% cap) we view this as more of a promotional/marketing ploy from Bilt, given that rate only applies to new purchases on new accounts given the company is transitioning issuers (away from Wells Fargo), and thereby applicable only to a small portion of receivables,” KBW said. 

BNPL boom?

The pressure on credit card issuers is also drawing attention to alternative credit sources, such as BNPL lenders, that may draw consumers that have a harder time getting approval from banks. “BNPL will see a rush into the credit industry,” Marc Butler, financial advisor and co-author of “Master Your Money,” told American Banker. “Fintechs will leap in because they will be the lender of last resort.” 

At Affirm, a move into rental payments comes as the BNPL lender is expanding its distribution partnerships. Affirm this week also said it is updating its underwriting to incorporate real-time signals such as account balances and a consumer’s cash-flow trends. Affirm makes a credit decision on each BNPL loan, considering a user’s purchase, credit history and past payment performance. Adding new data brings more context, according to the company. 

“Many credit cards approve consumers once at the moment of application. But people’s financial lives change, new jobs, lost jobs, raises, and everything in between,” said Vishal Kapoor, senior vice president of product at Affirm, in a release. 

BNPL lenders have faced criticism over concerns that consumers may quickly add debt, though recent Consumer Financial Protection Bureau data suggests the credit profile for BNPL consumers is improving. 

But the rate cap may also push consumers into even riskier options such as payday lending, according to Butler. 

“People who were using credit cards for everyday expenses are kind of desperate and they will need alternatives,” Butler said.