About Tanda by Yahoo Finance
Tanda is a savings app from Yahoo Finance that utilizes a community approach to saving. Members of a savings “circle” make deposits in rounds and, every round, one member of the circle is paid the total amount everyone contributed.
The concept of a community savings group is something that’s existed for many years. In Latin American countries, these groups are known as “tandas”, hence the app’s name.
Though tandas aren’t new to the world, they are new to the fintech space.
In an interview with TechCrunch at the beginning of 2018, Simon Khalaf, Yahoo’s head of media business & products department, said the company hopes to connect with Millennials who rely on apps to help them budget, spend and save.
“Thirteen months ago, a national outlet reported 46 percent of our nation can’t come up with a $400 emergency expense,” Khalaf said. “This inspired us to start building Tanda, a mobile world version of a centuries-old community savings tool that we hope provides a solution to many.”
Does the app provide the right platform for saving? How exactly does it work? Are there any fees related to using the app?
Those are the kind of questions that are important to you, the user, and without in-depth answers those inquiries it will be hard for you to make a smart choice.
We’re going to provide those answers throughout this review by examining the app’s features, its fees and what other users are saying about it.
Tanda’s Features: Circles, Trust Scores
To join Tanda, all you have to do is create an account, link a bank account and verify your identity. The identity verification is different than most fintech apps; it’s usually something you’d see with an investment app like Robinhood or a crypto exchange like Coinbase.
Once you’ve got your account set up and everything is verified, you can search Tanda to find a Circle, which is the name they give their savings groups. Here’s a screenshot of what their Circles page looks like:
Each option tells you what the savings goal is, how often payments are made and how many available slots there are.
We tapped on a $250 savings group that contributes $62.50 every two weeks. The users in the group are listed as circular photos at the top in order of the payout position. You can tap on any user’s photo to see what their Trust Score is (more on that in a second).
New users are limited to $250 groups. As your Trust Score rises, you can be eligible for savings groups of up to $2,000.
If you’re like me, one of my first thoughts was, “Can’t I just sign up for first position, make one payment, get the payout and leave?”
It’s a legit question considering that other people are relying on your contributions to meet your savings goals.
Tanda says, in this kind of situation, they’ll cover the losses a group suffers when someone drops out. But, to avoid having to take that step, Tanda assigns every user a Trust Score.
Your Trust Score is made public so other users can see how reliable you are. Your score rises and falls based on how prompt you are with your payments.
According to the Tanda FAQ section, here’s how you earn and lose points:
- 1 point for every on-time contribution you make to your Circle
- 3-point penalty for a late payment
- 20-point penalty for missing a contribution
Tanda says they only allow users with good scores to access the early payout positions and to join Circles with higher savings amounts.
Tanda’s Fee and Bonus Structures
Your savings circle works off of a fee/bonus structure. In a group of four people, the first person to withdraw money from the circle pays a fee of 8% of the total withdrawal. The next person to withdraw pays a 7% fee.
The third person to withdraw pays no fees but earns no bonus and the final person to withdraw gets a 2% bonus.
So, here’s how the structure would work for a four-person Circle saving $1,000:
- 1st person w/8% fee of $80: $920
- 2nd person w/7% fee of $70: $930
- 3rd person w/no fee: $1,000
- 4th person w/2% bonus of $20: $1,020
As you can see, Tanda’s savings circles benefit those who are willing to wait until the final contribution cycle to get paid. And, the 2% bonus you get is far better than the interest you’d earn in a savings account over the same period of time.
On the flip side, you pay a considerable fee to withdraw your money early but the position is considered better because you get your money quicker.
What Happens When You Don’t Pay?
Let’s say you are the last person out in a Circle and, after the first person gets paid, they bail. Tanda will cover that person’s payment.
The person who didn’t pay, though, isn’t off the hook. The company who processes all the payments and payouts made to Circles, Dwolla, says in their fine print that they can send your Tanda account to collections if you don’t pay up.
Two Financial Professionals Offer Their Opinion of Tanda’s Community Saving
A unique feature of this savings app is that it relies on small communities of people to hold each other accountable.
This type of communal savings is radically different than the tried-and-true auto-deposits you’d use for savings apps like SmartyPig or Digit.
We wanted to know how effective a community-focused savings structure was, so we sought the opinions financial pros.
Dennis Lott, a financial advisor with Jacksonville-based firm St. Johns Asset Management said saving with peers can be helpful.
“I like the idea of applying positive social pressure to encourage folks to save more,” he said.
However, Lott told us that it’s not the best decision to tie up into Tanda emergency fund money you’d need at a moment’s notice.
“Don’t lock up your emergency fund money. Keep that in an accessible bank account so it’s there when you need it,” he said.
Mark Fried, president of TFG Wealth Management in Newtown, Pa., said that one of the drawbacks of the Tanda model is that, while community saving could work in real-life situations, joining an online group of strangers may not provide you with the level of accountability and inspiration you’re looking for.
“In this particular case you don’t even know the other people, so what’s the accountability? I don’t know anybody in my savings circle,” he said.
He went on to point out that the way Tanda sets up their fees, only one person really benefits from using the app: the last one out.
“The only person who it works out for is the last person and, for everybody else, it’s not a good deal,” he said.
User Reviews of Tanda
The reviews of this app in the Google Play store are pretty critical. From what we read, users say that the app is extremely buggy. Several reviewers said they had issues connecting to their bank account.
The most common complaint said that circles weren’t working because the first two positions required higher Trust Scores but since everyone in the group was new, nobody had a Trust Score and therefore could not fill the first two spots.
To the app's credit, during our test of the app we saw users without Trust Scores occupying the first two positions. We’re assuming that, as users build up their scores, those first two positions will slowly be filled by more reliable savers.
At the time of publishing, the app received an average rating of 2.9 stars from 61 reviews.
The app fares much better with iOS users, who give it 3.8 stars in the iTunes store.
Our Final Thoughts About Tanda: Pros and Cons
As we ponder all the facts about Tanda and the input we received from Dennis Lott and Mark Fried, we believe there are some straightforward pros and cons with this app.
First, the pros. Users who get the final payout slot in their circle win because they get a 2% bonus. Earning two percent in, say, two months, is a pretty incredible rate of return compared to online and traditional savings accounts.
Also, the app puts you in a Circle community that, while not a real-life group of friends, may provide you the inspiration you need to save.
The downsides to the app are equally as clear and definitely more severe. First, if you’re one of the first two out, you’re paying a high fee to do so.
For those who need fast money, it’s an attractive option even with the fees, but remember that you’ll have to have a good Trust Score to get one of those first two spots.
Second, while Tanda says that your credit isn’t affected by participating in your Circle, the fine print says that violating the terms of service (i.e. paying your share) could result in Dwolla sending your account to collections, a move that will cause serious damage to your credit score.
In our opinion, Tanda is a good app for someone who has the discipline to save and uses the final spot in each circle to earn 2% on the money they earn from their savings group.
If you’re looking for a quick cash payout, we don’t think this is the best option for you because the punishment can be pretty severe: 7%-8% fees and credit damage if you don’t pay up.
These apps take an individual approach to savings, pushing you to come up with a regular savings schedule that helps you reach your financial goals.