- Rising credit card debt and student loans are a daily concern for many consumers and with outstanding debt, it can be hard for consumers to save.
- A wave of startups have cropped up offering their users automated ways to pay down debt and start saving.
- From rounding up transactions to the nearest dollar to putting away $0.50 cents a week, these startups are helping consumers start small with the backing of investors like Citi Ventures, Andreessen Horowitz, and Shark Tank's Mark Cuban.
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For many, credit card debt and student loans are a daily concern.
With millennials facing an affordability crisis and US credit card debt reaching record highs, many consumers struggle to balance day-to-day expenses, paying down debt, and saving.
And budgeting down to the cent to find a few extra dollars here or there is time-consuming.
Now, startups are stepping in offering consumers ways to pay down debt faster and start saving. Using automation, these apps link into users' bank accounts and loans to find opportunities to pay down debt or save. And they often start small, rounding up purchases to the nearest dollar or figuring out what you can afford to set aside in a given week.
Some help consumers make extra payments on their debt, while others keep the money in FDIC-insured savings accounts customized to users' goals.
Here are 5 startups that are helping consumers manage their debt, and betting that automation is the best way to start.
ChangEd
Headquarters: Chicago, Illinois
Founded: 2017
Total raised: $450,000
Last round: $250,000 convertible note in May 2019
Key investors: FIS, Mark Cuban
ChangEd collects users' spare change to make payments toward student loans. ChangEd rounds up purchases the user makes throughout the day, and collects the spare change in an FDIC-insured ChangEd account. Once the balance in the account reaches $100, ChangEd makes a payment to a user's student loan provider.
ChangEd charges users $1 per month for its service. On the app, users have a dashboard view of all payments made, the projected time it will take to fully pay off the loan, and an estimate of the money they could save by paying down their student loan sooner.
Digit
Headquarters: San Francisco, California
Founded: 2013
Total raised: $63 million
Last round: $27.5 million Series C in September 2019
Key investors: Citi Ventures (Honey, Plaid, Square), General Catalyst (Airbnb, ClassPass, Oscar), Ribbit Capital (Affirm, Credit Karma, Robinhood)
Digit is a personal finance management app that helps users automate savings. The startup lets users set up savings categories and goals, then automatically contributes money to an FDIC-insured bank account.
Digit uses automation to look at a user's bank account balance, upcoming bills, outstanding debt, and typical spending patterns to determine when and how much a user can afford to save. All savings amounts are automated in the Digit app, but in the event that an autosave transfer causes an overdraft, Digit reimburses the user.
There are no minimum balances for Digit accounts, and it's free for the first month. Then the startup charges users a subscription fee of $5 per month.
Qapital
Headquarters: New York, New York
Founded: 2012
Total raised: $47.3 million
Last round: $30 million Series B in April 2018
Key investors: Anthemis Group (Betterment, Carta, Moven), Entrée Capital (Postmates, Stash, Stripe), Northzone (fuboTV, Klarna, Spotify)
Qapital is a personal finance app that offers savings, investing, and checking accounts.
Its behavioral economics-driven approach uses rules and goals to encourage users to save more. Qapital's checking account offers insight into what the startup calls a "spending sweet spot," finding the right way to balance spending today versus saving for future goals.
Qapital runs on a tiered subscription membership model, where users can pay between $3 and $12 per month depending on which features they want to use. It's basic $3 membership option is just for savings, with spending and investing accounts available on the other tiers.
Qoins
Headquarters: Atlanta, Georgia
Founded: 2016
Total raised: $770,000
Last round: $750,000 angel round in July 2018
Key investors: Queen City Fintech (Class 7), Stacked Capital
Qoins automatically sets aside small dollar amounts for its users on a weekly basis, then uses the money to make extra payments against outstanding debt like credit card balances and student loans. The startup's automatic payments are meant to supplement users' regular monthly payments to their lenders.
Users can link any of their debt through the Qoins app to start the automated extra payments. Qoins offers a round-up function to save customers' spare change. It also offers what it calls "Smart Savings," where it will automatically set aside anywhere from $0.50 to $5 every few days to apply toward debt at the end of the month. The amount is determined by a user's settings of how much they want to pay down the debt by.
Qoins aims to help users pay off debt faster by setting aside small amounts every month. For each payment sent out to a lender, Qoins charges users a $1.99 fee.
Tally
Headquarters: San Francisco, California
Founded: 2015
Total raised: $92 million
Last round: $50 million Series C in June 2019
Key investors: Andreessen Horowitz (Airbnb, Instacart, Lyft), Kleiner Perkins (Better.com, Brex, Rent the Runway), Silicon Valley Bank (Quip, Square, Varo)
Tally is a credit card debt payoff app that gives users a line of credit to pay down credit cards. It uses its own algorithms to review all outstanding card balances and their interest rates, then looks at a user's credit history to determine eligibility for a Tally loan. If a user qualifies, they can set up automated payments using their Tally line of credit to pay off their credit cards.
With Tally, users save money in two ways: avoiding late fees and carrying a lower interest rate balance.
Tally offers late fee protection, which means that Tally can automatically use the credit line to make minimum payments on the credit cards to avoid the user being charged fees.
Users also save money with interest because instead of paying higher rates on outstanding credit card balances, users can use their Tally line of credit to pay the card off the card, then pay back Tally at a lower rate.
There are no fees to use the app, and rates on Tally's loans range from 7.9% to 25.9% depending on a user's credit history.