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Earn 2% on fixed rate savings – but there are several catches

Written by: Emma Lunn
‘Bank challenger’ Tally is paying 2% interest on one-year fixed rate savings – but there’s a £20 ‘joining fee’ to open an account and your money is not protected by the Financial Services Compensation Scheme (FSCS).

Tally is offering savers with £1,000 to £20,000 to deposit a one-year fixed rate account paying 2% AER – significantly higher than other one-year fixed rate savings accounts. The next best-paying account is from Zopa and pays 1.35%.

What is Tally?

Tally claims to offer the ‘world’s first non-fiat personal bank accounts.’ The bank alternative denominates cash from bank accounts and debit cards into an account, and each ‘Tally’ is then valued at one milligram of physical gold. The physical gold is stored in Brinks vaults in Switzerland.

The founders of Tally are quick to point out that gold has historically proven to increase in value over time when measured in fiat currency. They also say that it ‘operates in a full reserve banking environment, meaning customer funds are never loaned, leveraged or invested’.

Tally claims to be different from traditional banks and says it gives consumers ‘full ownership and control’ of their cash. It says Tally has been developed ‘in response to the worsening financial effect of the fiat currency fractional-reserve banking system on the general public’.

Tally says that using gold as the 100% physical reserve for the currency means the customer’s money is protected from inflation and inherent bank risks associated with fiat currency and the fractional-reserve banking system.

How does Tally’s savings account work?

The new savings product is only available through the Tally App to Tally customers. Non-customers will need to download the Tally app and complete the onboarding process to open an ‘everyday account’. Then you’d need to join the waiting list to open a savings account with accounts subsequently opened on a first-come-first-served basis.

Tally has a one-off £20 joining fee which you’d need to factor into the returns you’d make on your savings.

Lack of FCSC protection

If you deposit money with a traditional bank, your money is protected up to £85,000 per institution per person by the FSCS, in the event that the bank goes bust.

But Tally doesn’t have a banking licence – it has an E-Money licence instead. That means deposits are not covered by the FSCS.

Tally says that physical gold vaulted in Switzerland backs the money deposited in accounts. If Tally were to go bust, the gold represented as Tally in customer accounts would be sold by the ‘security trustee’ and the GBP value of each customer account, less a 1% fee, will be deposited into the customer’s designated bank account.

Andrew Hagger, founder of Moneycomms, said: “I can’t say I’m particularly excited by this deal, the £20 fee and lack of FCSC cover are both negative points – I’d rather go with Zopa at 1.35% as the returns aren’t far off once you factor in the fee, plus you have the comfort of the FSCS in the background.”

Cameron Parry, CEO and founder of Tally, said: “This product, and the Tally banking system in general, has been designed to give savers a fighting chance against rapidly rising inflation and financial volatility. And unlike traditional banks, our customer deposits are not leant out, leveraged up or invested, which makes saving with us more secure.

“The incumbent banking system undermines any benefit to saving whereas our new account provides security and transparency for savers whilst also introducing them to a better monetary system.”

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