Tally App Raises $42M, Launches Robo-Advisor To Manage Americans’ Credit Card Debt

Growing up in the woods of Breckenridge, Colorado, and homeschooled by fundamentalist Christian parents, Jason Brown remembers being constantly anxious about money. When he finally left to start college at Boston University, he had no financial support from his parents and relied on scholarships and loans.

He helped pay off his debts by starting a painting company CWP, which employed 400 people by the time he graduated. Years later, Brown funneled his childhood stress about money into creating Tally, a fully-automated app that helps users overcome credit card debt. The 38-year-old CEO and cofounder has managed to secure $42 million in funding for his startup, which he says has saved users millions of dollars in interest.

It works like this: After downloading the free app, users scan pictures of their credit cards. After a soft credit check—in which users are required to have a minimum score of 660—Tally analyzes their financial profile to determine the fastest and smartest way to pay down debt. It then offers users a new line of credit at a lower interest rate: between 7.9% to 19.9% per year depending on a user’s credit history.

“What we are doing is separating the burden of credit cards from the benefits,” Brown says. “With Tally, you are still using credit cards for rewards, but taking away the stress of payments, late fees and penalties.”  

This is key at a time where Americans are on pace to accumulate a collective $4 trillion in credit card and other types of consumer debt. According to a May report from CompareCards by LendingTree, the average annual percentage rate (APR) of a credit card reached 15.32% in March, an 18-year high.

Essentially, Tally replaces a user’s credit card debt with a single personal loan from Tally, without actually requiring him or her to cut up their cards or put them in a drawer. Each month Tally calculates a minimum payment for the user that includes the minimum due on each credit card; the interest due to Tally and at least 1% of the principal owed Tally. (The 1% ensures at least a little progress toward paying down the Tally balance, but smart users will presumably pay more.)

Then Tally takes charge, using its algorithm to figure out how much money to pay each card, with balances on the cards carrying the highest annual percentage rates (APRs) whittled down first. Tally also makes sure all the cards are paid in time, automatically sending payments at least two business days before a card’s due date.

After six months, Tally reassesses a user’s situation. Users who are paying down their debt (and paying Tally on time) will receive a lower interest rate and/or higher credit lines, Brown says. If a user pays the Tally minimum, they are able to pay off their debts in about 12 years, which is 10 years faster than they would have done without the service, Brown claims. However, he says the average user usually pays 2.5-times the minimum, so they can typically pay off their debts in about five years.

Brown says there are no fees (annual, origination or otherwise), as the company makes money by charging interest on the amount borrowed. And it offers a 100% no-late-fee guarantee—-provided, of course, you pay Tally on time. If Tally makes a mistake, it refunds the credit card late fee in full to the user.

So far, Brown says, while two thirds of Tally’s users are actively borrowing from Tally, a third are simply using the app for the benefit of consolidated credit card management. Of course, if you routinely pay off your credit cards in full each month, Tally won’t be able to help you save on interest—but then, you don’t need such help.  But you can opt to manage and pay all of your cards yourself through the Tally app, with a monthly reminder from Tally, or you can have Tally pay the cards in full. Either way, all users have a credit line attached to their accounts to protect them from late fees, even if they opt to pay their credit card balances themselves.

On Tuesday, Tally waded into its first in-app, robo-advisor enterprise. Called “Tally Advisor,” the feature helps the user come up with a specific date for when he or she will be debt-free, based on the users income, spending, current balances and level of debt. It then adjusts if and when users encounter financial setbacks or have increased cash flow.

“This is the first time we are allowing the algorithm to collaborate with people,” Brown says. “It’s constantly adapting as life has its twists and turns. As people have setbacks, it’s always updating. It’s factoring in new information.”

Though the robo-advisor is a free feature for every user, those without debt won’t find it particularly useful, for now. Thanks to $25 million in Series B funding led by Kleiner Perkins in July of this year, the robo-advisor and app will soon help to build “automation for every aspect of the average American’s financial life,” Brown says, though he declined to provide specifics.

But how does Tally get the money to pay off customers’ cards? Brown says the company borrows money from banks in bulk, which allows them to pass savings on to their users that wouldn’t typically be available to them. Tally makes money on interest, but only charges it if the app is able to save someone money with a lower APR.

“We are effectively buying in bulk on behalf of our users and passing the majority of those savings to them,” Brown says.

But MagnifyMoney cofounder and Forbes contributor Nick Clements questions whether a structured personal loan with a fixed term might be a better option than Tally if your objective is to become debt-free.

“They are very typical rates,” he says. “I look at the range of Tally and its not dramatically different from the range at personal loan companies.”

SoFi offers personal loans with interest rates between 6% and 15%. SunTrust Bank’s LightStream offers credit card consolidation loans with APRs ranging from 5.8% to 14%.

While Brown notes that Tally’s rates are “similar or better” than bank rates, he says there is one major difference. In May 2017, Tally conducted a survey of more than 1,700 people with credit card debt. They found that 70% of individuals who refinanced their debt are the same or worse off as they were three years ago. And 81% said they felt that debt refinancing actually makes it easier to accumulate more credit card debt.

“[Taking out personal loans] perpetuates credit card debt and doesn’t reduce it,” Brown says. “This is the big, hairy problem core America is facing, and Tally is first solution that roughly meets the need of this half of the population.”

Tally was founded in 2015 by Brown and cofounder Jasper Platz, but officially launched in October 2017. The duo previously founded Gen110, a consumer solar finance company that was acquired by Repower. After the July Series B funding round, Mamoon Hamid, managing partner at Kleiner whose portfolio includes Slack and Box, joined Tally’s board of directors.

Tally is currently available in Arkansas, California, Colorado, Florida, Illinois, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, Texas, Utah, Washington and Wisconsin. Brown says the recent funding round will help Tally’s expansion into other states, as well as moving from 50 to 100 employees.