Credit cards can be a useful tool to pay for purchases, especially in the event of an emergency, but if you’re regularly revolving your balance, you may be spending hundreds or thousands more dollars than you have to in interest. If you’re like most people, keeping track of various payment due dates and different APRs can get confusing: Americans, on average, have four credit cards, according to Experian.
Enter Tally, an app that helps simplify the process of paying off your credit card debt. With Tally, people can consolidate all of their monthly credit card bills into one payment.
Tally works like this: It provides users with a loan and then it pays off a user’s credit card bills. Users are then responsible for paying off the Tally loan. The Tally loan is an open line of revolving credit, much like a credit card.
However, one version of Tally can come with a hefty monthly fee and users also have to pay an APR on their Tally line of credit. While the Tally APR is supposed to be lower than the interest rate on any of your cards, there’s no guarantee you’ll save more money with Tally than you would without it.
Below, Select looks at how Tally works, its monthly fees and how you can decide whether it’s right for you.
How does Tally work?
While Tally doesn’t consider itself a debt consolidation service, it works similarly to one. Users can link all of their credit cards through the service and then Tally pays off the monthly minimum payment (or more) on each of the cards. If the value of your Tally loan exceeds your debt, Tally will make your monthly payments higher, so you’re paying off more than the minimum on your cards.
If you’re approved for a line of credit that is larger than the total amount of credit card debt you have, Tally will pay off the entire balance on all of your cards.
“If you’re approved for a line of credit that is less than your card balances however, we would only be able to pay down the balances for the amount you were approved for,” says Daisy Kong, director of communications at Tally. “As you pay Tally back and clear up enough of your Tally credit line, our algorithm determines what the optimal amount is for payment on all your cards to help save you the most on interest and fees.”
Users are then responsible for paying Tally’s monthly payment which includes Tally fees, interest on your Tally line of credit and 1% of a user’s Tally principal balance. Tally pays off your balance with your linked bank account.
In order to be eligible for Tally, Tally performs a soft credit check, which does not impact your credit score. Users must have a FICO score of 580 or higher. In order to determine the APR on your Tally loan, the service looks at your credit history and the APRs on all of your credit cards. The APR on a Tally loan can range from 7.9%, which is significantly lower than a credit card APR, to 29.9%, which is higher than many credit card’s highest APRs.
Tally aims to provide users with an APR that is lower than the ones provided on their credit cards, says Anthony Schrauth, Vice President of Product at Tally. If the APR on your Tally loan is higher than the APR on one of your credit cards, Tally will give you the option to pay off that credit card without using the Tally loan.
Tally also has a ‘My Payoff’ feature which gives users the option of making additional payments towards their credit card debt. With ‘My Payoff’, Tally will automatically allocate money towards certain credit cards based on the payoff strategy you choose. You can select from three payoff strategies: The avalanche, snowball or credit score factors method.
With the avalanche method, the debt with the highest interest rate is paid off first. The snowball method pays off your cards in order of their balance sizes, starting with the smallest balance first. Finally, the credit score factors method is focused on first paying off debt that has the biggest impact on your credit score.
Within the app, users can also pay down the balance on specific cards if they choose to.
Fees
There are two versions of Tally: Tally Basic and Tally+. Tally Basic is the free version Tally, providing users with access to a credit line with a low APR.
Tally+ offers users a larger credit line, than they would get with Tally Basic, and a discounted APR. The credit limit given to users can range from $2,000 to $25,000 for all users. It’s typical for a user to have between an $8,000 and $10,000 limit, says Scrauth, so if you have a substantial amount of debt you want to pay off using Tally, you may have to opt for Tally+.
With Tally+, users who make 12 on-time payments can have their APR lowered by 4 percentage points. However, Tally+ comes with hefty fees — a $25 monthly payment or $300 annually. You’ll want to do the math to see if the potential savings of Tally+ outweighs how much you’ll pay in fees.
Tally does not have any late fees, origination fees or balance transfer fees. Whenever users miss a payment, Tally won’t pay off your credit card bills for the month. While the company doesn’t charge late fees, users will be on the hook for interest on their credit cards and on their Tally loan if they miss payments.
Tally does provide users with late fee protection. For customers who are consistent about making their monthly payments, Tally will pay off their monthly credit card payments if they forgot to complete their Tally payment. This feature prevents users from incurring late fees on their credit cards. Users are required to pay Tally back for any interest that accrued before the next payment due date.
Should you use Tally?
To decide if Tally is a good option for you, you should consider whether you’re saving money by paying the Tally APR and fees instead of making payments on your individual cards. You should also consider if you can stick to making your monthly Tally payments.
Barbara Ginty, CFP® and host of the Future Rich Podcast, recommends that people only use a service like Tally when they’re sure that doing so will save them money. Ginty suggests that people create a spreadsheet or list of all of the types of debt they have, the current balance on those debts, the minimum payment values, the interest rates and the due dates.
After you calculate how much it will cost you to pay off your debt and how long it will take you based on the debt payment method you choose, you should compare that to what Tally offers you (ie. the APR and the fees). While facing the reality of your debt can be tough, it’s a necessary step in chipping away at it.
Ginty also notes that people should pay special attention to how long it will take them to pay off their debt. While people focus on lower interest rates with a debt consolidation service, they often forget that a longer repayment period could mean paying more overall, says Ginty.
Consider a 0% APR card or personal loan instead
Ginty recommends that people who can pay off their credit card debt in less than 20 months and who have a good credit score opt for a credit card with a 0% APR intro period.
With a 0% APR credit card, new users can receive a 0% interest rate, typically between 12 and 20 months, on new purchases. This means they can revolve their balance from month-to-month without paying interest.
If the card has a 0% interest rate on balance transfers, new cardholders can transfer a credit card balance from another card to the new one. The cardholder then has the length of the 0% introductory period to pay off the balance without interest. These 0% APR credit cards, however, may charge a balance transfer fee, typically between 3 and 5%, but it’s likely worth paying the fee if you have a significant amount of credit card debt.
Select ranked the Citi Simplicity® Card, the U.S. Bank Visa® Platinum Card and the Citi® Double Cash Card as some of the best balance transfer cards. However, in order to qualify for one of these cards you’ll likely need a good to excellent credit score.
Another option that you may consider is a personal loan. A personal loan provides you with a lump sum of cash deposited into your bank account that you can then use to pay off any type of debt you want. However, in order to qualify for a personal loan with a good interest rate, you’ll typically need a higher credit score. But generally, a personal loan will have a lower APR than a credit card.
Personal loans often have longer repayment periods than 0% APR credit cards, so if you need a longer period of time to pay off your debt, you could get a loan with a repayment period lasting many years. However, there are a number of fees you should be aware of when using a personal loan. These include origination fees, late fees and prepayment penalties or a fee for paying off the loan early.
Select ranked SoFi Personal Loans, Upstart Personal Loans and Marcus by Goldman Sachs Personal Loans as some of the best personal loans for debt consolidation.
Lastly, if you’re not sure whether you can make the monthly Tally payments, you should consider other options for paying off your debt. Since users can incur interest on both their credit cards and their Tally loans when they miss payments, you could end up spending significantly more with Tally than you would otherwise.
Tally is best for people who can ensure they’re paying less with the service than they would without it, who can make one monthly payment on-time and who prefer the ease of one monthly payment over multiple payments.
Bottom line
Tally providers a useful service: It consolidates all of your credit card payments into one and provides an easy-to-use interface which makes it easy for you to see all of your card balances and what you owe to Tally.
However, Tally can have steep interest rates and fees. The interest rate on a Tally loan can be up to 29.9%, which is just as high, if not higher, than the interest rate on many credit cards. Furthermore, if you have a lot of debt you may only be able to use the Tally+ version of the app to pay off all of your debt. Tally+ will cost you $300 annually. And of course, if you fail to make your Tally monthly payments, you’re responsible for paying interest on your Tally loan and on your credit cards.
If you’re interested in trying Tally, it’s worth calculating how much it would cost to use a Tally loan versus paying off your credit cards individually to see what would save you more money.
