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Maybe I'm missing something here, but this looks like a business with massive downside risk and very little upside. It's bundling a bunch of bad debt (nobody w

Maybe I'm missing something here, but this looks like a business with massive downside risk and very little upside. It's bundling a bunch of bad debt (nobody who manages their money well is going to pay 20% interest if they have better options) and hoping that the aggregate is less risky. I have a feeling we've seen that sort of wishful thinking about debt before. So what am I missing that makes Tally so good at managing the risk that people just run up huge debts on multiple cards and leave Tally holding the baby?

Animats 10y ago
Yes, not seeing the business model here. They're basically issuing a credit card of their own. Somehow, I suspect this will morph into a "consolidate your bills" scheme, or the low rate is only an introductory rate, or there will be big fees, or they try to sell you on a home equity loan, like LowerMyBills.com.
- deleted 10y ago
  [deleted]
- toronja 10y ago
  Good question on introductory rates and fees. Tally does NOT offer introductory or "teaser" rates. Your Tally APR is your Tally APR. And Tally does NOT charge ANY fees of ANY kind. Here's a cut and paste from our FAQ: "There’s no annual fee, no origination fee, no prepayment fee, no balance transfer fee, no late fee, no overlimit fee, nada. Like you, we hate hidden fees." Tally makes money by charging interest on the amount you borrow from us. We only make money if we can save you money. But that’s it.
  - Animats 10y ago
    The site does not seem to have terms and conditions, so we don't know if Tally reserves the right to change that at any time, with or without notice.
xapata 10y ago
They noticed that credit card companies make lots of money and are betting that they can skim from that profit margin. Seems reasonable to me.
jasper_platz 10y ago
we are planning to be pretty good about managing our risk :) but more importantly credit card debt isn't "bad debt" at all. most folks think that. there is about $700B of credit card debt of which about half is held by large pensions funds etc. and none of that paper defaulted in the financial crises.
- screature2 10y ago
  My understanding is that Credit Card ABS are kept at very good ratings via careful division and securitization of the credit card receivables into different tranches of risk and corresponding priority for repayments (specifically so that pension funds and investors of that ilk can invest). The fact that none of those securities defaulted during the financial crisis, doesn't mean that none of the underlying credit card receivables were written off or otherwise defaulted on. Seems that the parent comment's premise is essentially correct, you guys are going to be handling some portion of those credit card receivables and are betting that you can cherry pick or otherwise attract the safe/good/profitable portion. edit I realize that this comment probably comes across a fair bit more pessimistic than I intended. Actually, I think that this is a pretty decent bet. Pretty sure they're right about the existence of a class of cardholders who choose to carry a balance for convenience or short-term need rather than long-term circumstances or irresponsibility. Not sure what the TAM is on that, but definitely sounds like it's a hypothesis worth following up on.
toronja 10y ago
Jason (Tally co-founder) here again. Its a common misconception that people who carry a balance are irresponsible. 78% of people who do carry a balance have good credit (Prime & Super Prime). We surveyed 581 of our friends on FB who all have good credit. Most of them have college or graduate degrees and work in tech. 45% carry a balance and 29% paid a late fee in the last year. Bottom line: credit cards are the most profitable bank lending business (4x more profitable), so there is a lot of room to save people money and earn a profit as a company.
cloudjacker 10y ago
The financial crisis happened because banks were too highly leverages on collateralized debt, not because the debt was collateralized. Remember those "responsible mortgage holders", homeowners with culturally "good" debt? The whole economy tanked because only 7% of them defaulted. This business model is fine if Tally's leverage isn't too high.

Animats 10y ago

Yes, not seeing the business model here. They're basically issuing a credit card of their own. Somehow, I suspect this will morph into a "consolidate your bills" scheme, or the low rate is only an introductory rate, or there will be big fees, or they try to sell you on a home equity loan, like LowerMyBills.com.

deleted 10y ago
[deleted]
toronja 10y ago
Good question on introductory rates and fees. Tally does NOT offer introductory or "teaser" rates. Your Tally APR is your Tally APR. And Tally does NOT charge ANY fees of ANY kind. Here's a cut and paste from our FAQ: "There’s no annual fee, no origination fee, no prepayment fee, no balance transfer fee, no late fee, no overlimit fee, nada. Like you, we hate hidden fees." Tally makes money by charging interest on the amount you borrow from us. We only make money if we can save you money. But that’s it.
- Animats 10y ago
  The site does not seem to have terms and conditions, so we don't know if Tally reserves the right to change that at any time, with or without notice.

xapata 10y ago

They noticed that credit card companies make lots of money and are betting that they can skim from that profit margin. Seems reasonable to me.

jasper_platz 10y ago

we are planning to be pretty good about managing our risk :) but more importantly credit card debt isn't "bad debt" at all. most folks think that. there is about $700B of credit card debt of which about half is held by large pensions funds etc. and none of that paper defaulted in the financial crises.

screature2 10y ago
My understanding is that Credit Card ABS are kept at very good ratings via careful division and securitization of the credit card receivables into different tranches of risk and corresponding priority for repayments (specifically so that pension funds and investors of that ilk can invest). The fact that none of those securities defaulted during the financial crisis, doesn't mean that none of the underlying credit card receivables were written off or otherwise defaulted on. Seems that the parent comment's premise is essentially correct, you guys are going to be handling some portion of those credit card receivables and are betting that you can cherry pick or otherwise attract the safe/good/profitable portion. edit I realize that this comment probably comes across a fair bit more pessimistic than I intended. Actually, I think that this is a pretty decent bet. Pretty sure they're right about the existence of a class of cardholders who choose to carry a balance for convenience or short-term need rather than long-term circumstances or irresponsibility. Not sure what the TAM is on that, but definitely sounds like it's a hypothesis worth following up on.

toronja 10y ago

Jason (Tally co-founder) here again. Its a common misconception that people who carry a balance are irresponsible. 78% of people who do carry a balance have good credit (Prime & Super Prime). We surveyed 581 of our friends on FB who all have good credit. Most of them have college or graduate degrees and work in tech. 45% carry a balance and 29% paid a late fee in the last year. Bottom line: credit cards are the most profitable bank lending business (4x more profitable), so there is a lot of room to save people money and earn a profit as a company.

cloudjacker 10y ago

The financial crisis happened because banks were too highly leverages on collateralized debt, not because the debt was collateralized. Remember those "responsible mortgage holders", homeowners with culturally "good" debt? The whole economy tanked because only 7% of them defaulted. This business model is fine if Tally's leverage isn't too high.