Rocket's credit card lifts off

Rocket Cos. formally unveiled its reward credit card offering, which will allow home purchasers to put points toward closing costs and down payments. The card also will allow servicing customers to use points to pay down some of their principal.

The company had previously revealed the program was in the works during its fourth quarter earnings call.

"Every day, consumers tap their credit card to refill their gas tank, stock up on groceries or pay for any number of other purchases," said Haroon Mokhtarzada, co-founder and CEO of Rocket Money, the personal finance app acquired in 2021 when it was known as Truebill. "Now, those transactions can unlock the dream of homeownership for millions of consumers across the country."

Equity analysts at Keefe, Bruyette & Woods, who have been critical of what they say are high customer-acquisition expenses in Rocket's retail mortgage origination purchase operation, said the new card could help the company address that challenge.

"From a longer-term perspective, this could grow the broader Rocket ecosystem, provide the company with valuable data, and reduce the cost to acquire a borrower," wrote KBW analyst Bose George in a note. "Programs like this increase the likelihood that the company will solve this issue over time."

This is not the first time these forms of secured and unsecured lending have crossed paths. Various mortgage companies and banks have experimented with similar crossovers from time-to-time as a borrower incentive.

Among those prior efforts, FT Mortgage Cos. gave its customers the Downpayment Card in 1999, where the borrower was able to use the Visa-branded product to take a cash advance to fund the upfront costs on a 95% to 97% loan-to-value ratio mortgage.

Wells Fargo brought the Home Rebate Card out in 2007. In a 2013 reboot, the company said borrowers used the card to pay down $50 million in principal over the prior five years.

JPMorgan Chase offered 100,000 rewards points to Sapphire credit card holders who close a home purchase mortgage with the bank in a 2017 promotion.

On the other side of the ledger, in 2012, credit card provider Discover Financial Services got into the mortgage business with the purchase of LendingTree Loans. But just three years later, after finding that providing home financing was more difficult than expected, it closed Discover Home Loans. (However, it stayed in the home equity segment.)

The Rocket Signature Visa Card will let home purchasers earn 5% back on transactions, up to a total of $8,000 for their closing costs or down payment.

Servicing customers can choose to use the points earned from their spending to receive 2% towards the unpaid principal balance. They also get the annual $95 fee waived.

As part of the promotion for the launch, those people who spend $3,000 on the card in the first 90 days earn a $200 statement credit.

A Utah-chartered industrial bank called Celtic will issue the card on Rocket's behalf.