Cash App, the peer-to-peer payments service developed by Square could soon be offering selected users loans of up to $200.
Although still in the testing phase, with Square trying out the system on around 1,000 mobile payment app users, who can request the short-term loans available in amounts between $20 and $200.
Requests made via the mobile app get instant approval and need to be paid back within four weeks – however there is a one-week grace period if you don’t make the deadline. Loans come with a flat 5% interest fee, while non-compounding interest is added at 1.25% each week after the grace period expires.
Cash App loans
While the loans could be seen as a useful short-term benefit of using Cash App the additional costs resulting from those rates have the potential to add up rapidly, resulting in a sizeable 65% APR figure.
It’s therefore likely most users will settle any outstanding amounts as soon as possible given the high costs to borrow such relatively small amounts of dollars. Due to the potential implications of offering loans in this way it’s not clear whether Square will be rolling the idea out as a permanent feature.
The new feature boosts Square’s growing range of non peer-to-peer money transfer products. They include the likes of free plastic in the shape of the Cash Card, rewards program Cash Boost and Cash App Investing.
