Bilt brings opportunity cost front-and-center with Rakuten (On Nick’s mind)

Five or six years ago, I wrote a post asking How much do you pay for your miles and points? In it, I made the argument that choosing rewards costs you the opportunity to have earned cash. It isn’t a “fun” take and it steals a bit of the Joy of Free, but as Bilt launched the ability to earn rewards through shopping portal Rakuten this week, it became clearer than ever just how much it costs to choose points. At the same time, the Rakuten partnership might create enough of a carrot for many more folks to consider chasing after Bilt elite status.

Bilt through Rakuten puts opportunity cost front-and-center

I was thrilled to change my Rakuten earning preference from Amex Membership Rewards to Bilt points yesterday. I have both confirmed and pending Rakuten rewards that should pay out next week, and I will be happy for them to become Bilt points that are transferable to programs like Hyatt and Alaska, where I don’t have as many points as I’d like.

But choosing to earn Bilt points through Rakuten, unlike choosing Amex points, does not show your rewards balance in the form of points, but rather in cash back.

That has an interesting psychological effect. Nothing has materially changed: I was already choosing Amex points over the opportunity to earn cash back. And truth be told, if I just kept taking Amex points and cashed out via the Platinum Card® for Schwab, I could have 10% more cash yet. But the psychological effect of Bilt earnings through Rakuten showing up in the form of cash back is that it feels a lot more like I’m buying Bilt points for $0.01 per point.

After all, my account now shows $400 in confirmed cash back and $250 more pending. It feels more like I’m paying $400 for 40,000 Bilt points with the mechanics of this switch. Again, that’s not a functional change but rather a psychological one based on the way the rewards are displayed.

Truth be told, I’m a buyer of Bilt points at that price (which is to say that if I had the opportunity to buy 40,000 Bilt points for $400, I would be happy to do so), so I don’t exactly feel badly about choosing Bilt for my Rakuten earnings. In reality, I should note that since I have the Schwab Platinum card, it is more like I gave up the opportunity for $440 in cash in order to receive 40,000 Bilt points, an “opportunity cost” of 1.1c per Bilt point. It is easy to imagine getting far more than 1.1c in value per Bilt point, but when I see the numbers in dollars-and-cents figures, it feels a lot more like a purchase than a tradeoff. I’m not really “buying” Bilt points, but it lays bare the trade I’m accepting by letting my Rakuten “cash” get converted to Bilt points at payout.

And it additionally makes clear the cost of the reduced conversion rate for non-elite members. After the first six months, it is expected that non-elite members will only receive 50 Bilt points per $1 of Rakuten cash back, so at this time next year, $400 in my Rakuten account may only turn into 20,000 Bilt points. If I don’t achieve Bilt status and I let rewards turn into Bilt points at the lower rate, I think I’ll certainly feel like it “cost” me $0.02 per Bilt point, and I feel less enthusiastic about that trade.

It is important to be reminded of this trade that we make every time we accept earning points instead of cash back (not just through Rakuten, but any time we choose to earn points instead of cash back). The point of my old post about how much it costs to earn points and miles was that we make this tradeoff all the time, even though we don’t always think about it. But this move to Rakuten “cash back” that gets converted to Bilt points makes that more obvious. That thought started to call into question other oortal earning decisions as well.

Bilt Rakuten vs other portals and Capital One Shopping

One of my big coming dilemmas is going to be where to draw the line between earning Bilt points from Rakuten vs earning Capital One Shopping rewards. This dilemma already existed when I was choosing between earning Amex Membership Rewards points via Rakuten or Capital One Shopping Rewards, but I had to revist that in the context of earning with Bilt.

Rakuten has long been incredibly popular for its reliable tracking and good customer service. Capital One Shopping sits in contrast: some people have great difficulty with orders tracking properly, and customer service experiences have been subpar for many folks.

However, my experiences with Capital One Shopping have largely been quite good. And the frequency of terrific targeted shopping offers has been incredible. Just last week, I made a $255 booking through Viator with 30% back from Capital One Shopping, only to get targeted with 70% back via TripAdvisor a few days later and rebook the same activity with $178.50 back. Rakuten was offering 10% back, which would mean $20 or 2,000 Bilt points. In that case, I didn’t need to think hard to realize that I would rather have the Capital One Shopping rewards.

But where do I draw the line? At what point would I pick Rakuten/Bilt?

Let us suppose that I had an offer to earn 10%/10x Rakuten/Bilt or 30% back via Capital One Shopping. In the interest of easy math, let’s imagine that I were going to spend $1,000. I could earn:

• $100 cash (if I took Rakuten rewards as cash)
• $110 via the Schwab Platinum card (by earning Amex points and then redeeming for a deposit to Schwab at 1.1c per point)
• 10,000 Bilt points
• $300 in Capital One Shopping rewards

If I valued the Capital One Shopping rewards at 50% of face value, that’s like a choice between $150 or 10,000 Bilt points. Am I a buyer at 1.5c per point? And do I really value the opportunity for a Marriott or Hotels.com gift card at only fifty percent of face value?

If I value those gift cards at 70% of face value, that’s $210 versus 10,000 Bilt points. At 2.1c per Bilt point, the price to buy Bilt points is a bit rich for my blood. And after the first six months, remember that without elite status, the Bilt option will only yield 5,000 points. At that point, the $300 in Capital One Shopping rewards begins to look far more attractive.

Of course, that’s just one example. In other cases, the difference will be far smaller. The question is: at what point am I happier to earn cash or a cash-ish gift card from Capital One Shopping?

I’m having some difficulty answering that definitively, but the Rakuten switch to display my rewards as cash makes me think about it more.

It isn’t cut and dry. Capital One Shopping gift card redemption options have ebbed and flowed over time. Sometimes, the options have downright sucked. For a while now though, they seem to have made a marked improvement. Sometimes, when the shopping portal features increased offers, we’ve seen similar offers from the Capital One credit card portal. There have been offers as high as 30 or 40 Capital One miles per dollar spent (or even more in some cases). Where is my X-factor that will determine whether I reach for Rakuten rewards or something else (particularly those Capital One miles)?

I think that our Reasonable Redemption Value is a good reference point here. Our Reasonable Redemption Value for Bilt points is 1.55c per point. It is certainly possible to get more value, but if I’m going to trade away the chance for cash in favor of Bilt points, those Bilt points would need to be costing me less than 1.55c each. Therefore, if I am comparing Rakuten to another shopping portal, I would choose Rakuten so long as the other portal isn’t beating the Rakuten rate of return by more than 55%. To put that in a concrete example, imagine:

• Rakuten is offering 10% back
• A competing portal is offering 12.5% back
• On a $1,000 purchase, the option is to earn $100 Rakuten cash / 10,000 Bilt points or earn $125 back. The opportunity cost to earn Bilt points is 1.25c per point. I’d probably rather earn Bilt points.

However, if the competing portal were offering 18%, the balance starts to tip:

• Rakuten is offering 10% back
• A competing portal is offering 18% back
• On a $1,000 purchase, the option is to earn $100 Rakuten cash / 10,000 Bilt points or earn $180 back. The opportunity cost to earn Bilt points is 1.8c per point. I’d probably rather earn cash than give up the chance to earn $180 in cash for the opportunity to earn 10,000 Bilt points.

And keep in mind that the math on that will change for non-elite members when the conversion rate from Rakuten to Bilt changes in 2026. At that point, I’d rather be earning cash back:

• Rakuten is offering 10% back
• A competing portal is offering 12.5% back
• On a $1,000 purchase, the option is to earn $100 Rakuten cash / 5,000 Bilt points or earn $125 back. The opportunity cost to earn Bilt points is 2.5c per point. I’d rather have the cash in that case.

All of that eliminates factors like the reliability of the other portal, the additional complication of multiple shopping portal accounts, etc. Still, once the Rakuten conversion rate drops for non-elite Bilt members, it would become hard for me to continue to consider taking Rakuten rewards as Bilt points. Will we see one of the new credit cards offer Bilt elite status, a reduced path to Bilt elite status, or some way to lock in the higher Rakuten redemption rate? That all might make a difference.

It does still leave me in a dilemma with Capital One Shopping. Given the restriction to only redeem Capital One Shopping rewards for gift cards, and the past variance in gift card redemption options, one can’t think of Capital One Shopping rewards as “cash”. At the same time, we have seen less variance over the past few weeks, and some of the currently available options (like Marriott, Hotels.com, Best Western, and Best Buy) feel closer to cash to me than what we were seeing.

I think that if I can earn double the rate with Capital One Shopping that Rakuten is offering, I’ll probably stick with Capital One Shopping. In other words, if Rakuten is offering 10%, but I can get 20% or more from Capital One Shopping, I think I’ll probably stick with Capital One Shopping so long as gift card redemption options continue to stay strong. For me, some of this strongly hinges on Marriott. If my options are to rearn $100 in cash back from Rakuten, which will become 10,000 Bilt points (and then perhaps 10,000 Hyatt points by transferring) or $200 in Marriott Gift Cards (if that redemption option sticks), I think I’d take the Marriott gift card option since I could then re-stack the Marriott gift card (clicking through Capital One Shopping to make a reservation that I later pay at the hotel, earning Capital One Shopping cash back plus hotel points when I redeem the gift card). And I can use the gift card to cover not only the room rate, but also food/spa treatments/other room charges. But Hyatt points obviously can be even more valuable in the right situation. I think it’s probably a tough call for many people at the current Rakuten-to-Bilt conversion ratio.

But when that rate drops to 50 Bilt points per $1 in Rakuten cash and that comparison becomes 5,000 Bilt points or $200 in Marriott Gift Cards (assuming that Capital One Shopping redemption sticks around), I’d be far more inclined to go with Capital One Shopping.

Will this make the pursuit of Bilt status more exciting?

If I’m able to generate Bilt elite status and potentially move my Rakuten-earned rewards to a partner with a generous transfer bonus, the pendulum could swing heavily toward Rakuten/Bilt.

Having Bilt status is expected to be the key to maintaining a conversion of 100 Bilt points per $1 in Rakuten cash back (though this is subject to change). Bilt elite status is also a key to unlocking better Rent Day transfer bonuses. If you can both lock in the better Rakuten conversion rate and then move those points with a transfer bonus, the math could start to swing heavily toward Rakuten and Bilt.

As someone who earns quite a few points and miles each year, I could imagine waiting for Bilt transfer bonuses and juicing the return on my Rakuten rewards a bit further. That makes me more interested in Bilt status now than I was before.

Is that enough to make it worth spending on a Bilt card?

We’re going to have to wait and see what the Bilt Card 2.0 holds in store when it launches in February, but I could see Bilt elite status becoming even more relevant if the new cards offer accelerated paths toward elite status and that status both maintains a good conversion rate from Rakuten and access to transfer bonuses. In fact, while most of my portal shopping has shifted to Capital One Shopping over the past couple of years thanks to their crazy targeted rates, Bilt might just draw me back toward a stronger focus on Rakuten. But whether or not that happens likely hinges on how the new cards relate to earning elite status. With the right scenario, I could see Bilt status looking much more attractive for the possibilities with Rakuten in terms of both earning Bilt points and then leveraging transfer bonuses.

I find it very interesting that Bilt is both forcing me to think about the opportunity cost of my Bilt/Rakuten rewards while simultaneously making me consider the chase for elite status to maintain a good earn ratio through the chance to stack with transfer bonuses. That’s quite a series of carrots. If they make it a bit easier to chase those carrots with the Bilt Card 2.0 launch, I might have to bite.

Want to learn more about miles and points? Subscribe to email updates or check out our podcast on your favorite podcast platform.