Tally is an iOS financial app that helps you gain control of your credit cards by making strategic payments based on balances and interest rates, saving you money on interest payments.
Tally was started in 2015 by Jason Brown and Jasper Platz, two entrepreneurs with backgrounds in venture capital and technology. Their San Francisco-based company made headlines in 2016 when it closed a round of $15 million in fundraising.
According to a TechCrunch article, investors liked Tally because they provided a solution for everyday problems that consumers face. As we’ve pointed out in other articles, there are more consumers who carry balances on their cards than those who pay off their balances or don’t use their cards at all.
With all that debt floating around, it seems that a service like Tally could be a huge help. But, is it as beneficial as they say it is? We wanted to figure out exactly how the app worked, how much it could cost you in the future and whether or not it’s as beneficial as they say it is.
To understand exactly how Tally works, we researched all the information available about the app on its website, as well as poring through the fine print.
How Tally Works: Paying Your Credit Cards
The problem that Tally is trying to address is common. You’ve got three or four credit cards, each with their own credit limits, balances, APR’s and due dates.
Do you have all of them on auto-pay? Is it just one or two? Do they send your due date notices to the right email address or street address?
Answering no to any one of these questions can put you at a serious disadvantage and end up costing you late payments – between $35 and $37, usually – and interest rates that average anywhere between 15.99% and 24.99%.
And what’s worse is that some credit cards have a “penalty APR”, which means one late payment will send your APR to 29.99% either for six months at a time or permanently.
Their solution is the app: You tell them which credit cards you have and give them permission to access your accounts.
They then take a look at your balances, monthly payments and interest rates. From there, they determine a repayment strategy that will help you save money in the long run.
At this point, you’ll need to open a line of credit with Tally in order to become a user.
The Tally Line of Credit
A "line of credit" is a financial term that means a company has approved you to borrow a certain amount of money (credit limit) that you can take advantage as frequently or as seldom as you’d like. You only have to repay the line of credit if you use it.
Basically, a credit card is a fancy type of line of credit. So, why would you need another credit-card style financial product like what Tally is offering?
The answer to that question gets right to the heart of how Tally claims they can help you.
Here are the basics of how this works. Tally performs a credit check to see how you’ve been doing with your current/past loans, credit cards and other financial products. If your credit scores are below 660, you won’t be approved.
However, if you qualify for a Tally line of credit, you’ll be informed how big that line will be and, according to their website, the interest rate will be somewhere between 7.9% and 19.9%.
Once you’re approved for a line of credit, Tally will use that line of credit to pay off your credit card balance or balances. You then make payments to Tally each month.
Important question: How could this new line of credit help you?
Well, let’s say you’ve got a credit card with a balance of $4,000 and the APR is 19.99%. You got the card when your credit scores were lower, hence the high APR. But, now, your scores are much better: beyond 720, in fact. You ask your credit card company to lower your APR and they say no.
You are now stuck with interest payments that could be as high as $66 a month if you average daily balance is $4,000. You don’t want to pay that much each month. You need a lower rate. That’s where Tally comes in. Since you’ve got good credit, there’s a good chance you can get the lowest rate: 7.9%.
That reduction in interest could save you more than $40 a month in interest payments on a $4,000 daily balance. However, Tally’s goal isn’t just to get you to switch your debt to them.
We talked with Tally Head of Growth Mark Powlen, who said that they want Tally to help you reduce your debt and build responsible financial habits that can strengthen your long-term financial health.
So, there’s a good chance that Tally’s algorithms will ask you to pay more than a minimum payment, which most credit cards determine by calculating 1% of your balance plus interest payments.
Paying more each month instead of doing the minimum payment will help you pay down your debt faster and waste less money on interest payments.
For example, if you went with a minimum payment on your Tally debt for the daily $4,000 balance at 7.9% we mentioned earlier, then you’d pay about $26 a month in interest.
However, if Tally designed a payment that helped pay off your $4,000 balance in two years, then your interest payments would slowly decrease over time and more of your money would go to your debt.
Our Final Thoughts About Tally
Based on our research, we believe that Tally’s credit card repayment plan amounts to refinancing, which, in this context, means Tally buys your balance from the credit card company and offers you a lower interest rate.
Most refinancing lenders leave it at that, though. They get your debt and you make payments to them instead of your credit card company. However, in our research and discussions with Tally, we discovered that their app is continually working on your behalf to figure out how to pay your debt down more quickly.
It’s like having a basic version of a debt counselor on your phone; it formulates payment amounts and strategies that benefit you. We believe this combination of refinancing and focused advice is the app’s greatest strength and what sets it apart from a refinancing lender.
As for the downsides, we believe that Tally may not be the best fit for someone with credit scores around 700 or higher who can get a card with a 0% interest offer on balance transfers.
The Citi Double Cash, Chase Freedom Unlimited and Discover it are three examples of cards with at least 14 months of 0% interest on balance transfers. They also can earn you at least $375 in cash back the first year depending on how much you spend each month.
A few things to keep in mind, though. First, you’ll pay between a 3% and 5% fee on those balance transfers. Second, making one late payment on the Citi card or the Chase card could void your 0% and your regular APR will kick in. In the case of the Citi card, you could end up paying a penalty APR of 29.99%.
There isn’t a hard rule for losing 0% so it’s not a guarantee that you will. In our conversations with both credit card companies, they told us that they decide on a case-by-case basis who will lose their 0% and who won’t after a late payment.
The Discover card won’t take away your 0% rate if you pay late. The same rules apply to Tally; late payments don’t incur fees or higher interest rates.
Keep in mind, though, that your credit card companies aren’t concerned with helping you pay off your debt faster. The longer you take to pay down your balance, the more money they earn from your interest payments.
Tally, on the other hand, fashions payments intended to pay off debt faster and eliminate high interest payments.
If you aren’t convinced that Tally is right for you, check out our reviews of the credit cards we mentioned earlier (each has a link to their review) to find out how those cards can help you pay off your balances.
Also, read through our guide to budgeting; it lays out the principles you’ll need to be proactive in paying off your debt.