What We Should Learn From The Brex Flameout

by joeheg

Some of you might be asking, “What is Brex?” and rightly so. Honestly, I don’t think most people in the points and miles world knew about the fintech company until 2021, but I’m getting ahead of myself. Fortunately, this isn’t a long story.

What was Brex’s business? Lending money to start-up companies with cash but no credit history. In fact, the company’s CEO admitted that most of their clients were going to go bankrupt.

“We assume that 70% of our businesses are going to go out of business every couple of years, because we serve start-ups and most start-ups fail,” he said.

CNBC commented on a risk with Brex’s business model.

Its main product, an unsecured, high-limit charge card for start-ups, exposes it to risky, money-losing companies that could fail in droves in a recession.

But despite the pandemic, there was no recession. In fact, the access to money at low-interest rates gave an incentive for companies like Brex to keep expanding. This was the only way to keep growing business partners and gain favor with Silicon Valley for the next round of investors.

It was early 2021 when Brex started marketing their product with an emphasis on earning frequent flyer rewards. In fact, the initial sign up offer for the Brex Cash card was almost too good to be true.

Brex offered 110,000 transferrable points for businesses that opened a Brex Cash account. Here’s what One Mile at a Time said about the offer:

I’ve earned over 110,000 points (which can be transferred to airline partners) without a credit pull and without paying a dime in fees. This is quite literally an unprecedented opportunity.

These are probably the easiest points I’ve ever earned (easier than any credit card sign-up bonus), and best of all, I have a business cash management account that I actually like, and plan to keep long-term.

Frequent Miler also wrote about Brex and how it was a great deal if you could get in on it.

Brex Cash is a business cash management account that comes with a linked credit card.  The credit card works a bit like a debit card: you can only spend up to the amount you have available in your cash account (actually, with the Brex card, your credit limit is usually only 80% of your available cash).  Even though the cash account is not technically a checking account, there’s no discernable difference that I can see.  If you own an LLCLLPC-corp, or S-corp then this may be a good opportunity for you…

You can cash out Brex points, making that sign up bonus worth $1,100 or transfer points to Brex airline partners.

  • Aeromexico Club Premier
  • Air France/KLM Flying Blue
  • Avianca Lifemiles
  • Cathay Pacific Asia Miles
  • Emirates Skywards
  • JetBlue TrueBlue
  • Qantas Frequent Flyer
  • Singapore Airlines KrisFlyer

Needless to say, many people in the points universe who had LLC, LLP or were incorporated took advantage of the Brex offer. Several of them were still using the service until yesterday, when Brex sent emails to many users informing them that their business was no longer wanted.

It wasn’t only small businesses that received emails about their accounts being shut down. Some with 8-figure account balances received the same message.

With no indication from Brex about the reason for the closures, many were left to wonder why the company would abandon customers that they paid over $1000 each to acquire with a sign-up bonus.

There was one insight about what might be causing the account closures:

Since Richard currently works for Bilt Rewards, I’ll take his word about how the banking and finance markets are working at a time of increasing interest rates. I also wonder if the move by Brex (which has nothing to do with Bilt, for those who are confusing the two companies) has anything to do with the Fed increasing the interest rate by 0.75%.

I don’t want you to think that I am against any of the websites that referred readers to sign up for a Brex account. Actually, it was a great deal if you were eligible. Even if you still have every point in your account, Brex is giving account holders until August to close accounts and transfer points for cash or to an airline’s loyalty program (but I’d close your account ASAP if I were you).

I’m trying to say that if you sign up for an offer that seems too good to be true, it usually is. Sometimes you’ll be able to cash out and keep your rewards but you might not always be that lucky. Therefore, it makes sense to treat the points like winnings at a casino. Take the money and run.

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This post first appeared on Your Mileage May Vary


JohnB June 24, 2022 - 10:30 am

I did not qualify for a BREX account. Glad, I never bothered.

JohnB June 24, 2022 - 10:31 am

Did you sign up for Brex? What was your experience?

joeheg June 25, 2022 - 12:47 pm

Never signed up for it. Too much hassle at the time.

CardShark June 25, 2022 - 7:40 pm

For a period of time, I had decent restaurant spending, so the offer made perfect sense.
The explanation, IMHO, is lame, that smaller businesses were clogging support channels. I never reached out to support, and the purchases were secured by a cash account, paid daily, so I don’t see the risk to Brex. It would seem that those of us leaving a cash balance, that the terms were more favorable to Brex as rates rose.


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