Our increasingly automated world should make driving safer. It could also make things safer for your checkbook.
And just like with cars, it takes a healthy amount of trust to let the machines take over.
“[It’s] kind of like a self driving car for your credit card,” saidJason Brown, cofounder of Tally.
Tally is a new app that offers the ability to automate your credit card payments, ensuring you’ll never again be hit with a late fee.
A serial entrepreneur, Brown has already founded and sold three companies including Gen110, which provided solar panels to homeowners who had big energy bills.
Tally and Gen110 share a similar idea: Finding a market in which people are being charged too much and making a product that benefits the consumer.
Credit cards, he said, were a prime target.
“As I dug into it, I just came to understand that credit cards are the most profitable bank lending business,” Brown said in an interview with Mashable. “They’re four times more profitable than any other loan they give.”
There’s a lot to like about Tally, but at its core, the app still operates much like a credit card company combined with a financial manager.
Tally tracks your accounts and then figures out the best way to pay off your credit cards. Users have to apply and get a line of credit from the company. You pay Tally, Tally pays the credit card companies.
That might seem like adding an unnecessary step to the process, but the upside is that Tally may prove to be better than you are at handling your credit payments. Brown said the company guarantees its users will never pay another late fee.
To get that service, however, you’ll have to scan in all your credit cards and put a decent amount of trust in the startup.
“Our dream is that people’s credit cards live inside an app and instead of carrying their balances on credit cards, they’re carrying them on their phone,” Brown said.
Part of Tally’s appeal is that it also charges far less interest than most cards, which can be a big deal for people with a lot of debt although those people may not be eligible for the service.
If you have a high interest rate on your card but have a good credit rating, Tally will pay that off and then charge you a lower rate of interest on the same balance.
Tally makes money the same way as the credit card companies charging interest on your credit debt but at a lower rate (the company says that rate could be as low as 7.9% but also as high as 19.9% depending on your credit history).
It may sound great, but Sean McQuay, credit card expert at NerdWallet, had some reservations.
“I’d want to make sure that consumers are getting a significant discount on their [annual percentage rate] from the credit card portfolio they’re looking to pay off,” he said.
He noted that the app does provide a measure of convenience in making payments for you and there is the chance to save money.
“If it is significantly cheaper from an APR perspective than your current credit card loans … that very well may be worth it from the money management perspective,” McQuay said.
It’s a timely idea. U.S credit card debt isprojected to hit $1 trillion later this year, nearing the previous all-time high. The last time there was this much credit card debt? Just before the financial crisis of 2008 sent the U.S. into a recession.
That’s some very lucrative debt for the banks. The average U.S. consumer with credit card debt pays more than $2,500 in interest on their credit card debt each year.
That number is high because of the APR annual percentage rate which is the amount of interest a credit card charges. For most cards, that number falls between 15 percent and 20 percent.
“People who have good credit are the majority of balances, and they’re paying a ridiculous APR, around 18 percent,” Brown said.
For now, Tally is just starting to let users try the app. There’s a waitliston their website. Tally recently raised a $15 million round of funding its first major influx of cash since bringing in $2 million in June 2015 to get the company started.
McQuay noted that qualifying for Tally is still an important hurdle, and one that will preclude the app from helping those with major credit card debt.“The kicker here is the people that need help the most are people that most likely wouldn’t quality for the service in the first place,” he said.
McQuay also added one last word of warning: Using Tally means trusting the company to get involved with a very sensitive part of a person’s finances.
“If something goes wrong there … your credit cards are no longer being paid, and because the consumer put so much trust in Tally, that can cause problems,” he said.
When asked if he was concerned banks and credit card companies might try to thwart Tally for ruining their market, Brown noted there’s not a lot they can do short of having Congress step in.
“We’ve built our technology in a way that at least legally there’s nothing they can do,” he said.
Getting under the skin of the companies, he added, was part of the fun.
“Using finance to take value away from the big incumbents that have massive cost structures … and are quasi-monopolies,” he said.”That’s the kind of shit that gets me up in the morning.”
Updated: May 30, 2016, 4:55 P.M. EST Story amended to clarify that average U.S. consumer with credit card debt pays $2,500 in interest per year.
Have something to add to this story? Share it in the comments.