Square Tests New Cash App Feature To Let Users Borrow Up To $200

Square Inc’s SQ Cash App is testing a new feature that allows some users to get up to $200 in short-term loans, TechCrunch reported Wednesday.

What Happened

The Jack Dorsey-led company is running the loan pilot with nearly 1,000 users and the service is likely be rolled out to more people in near future, as the health of the global and domestic economy remains poor, according to TechCrunch.

Cash App customers can borrow between $20 and $200 and are expected to pay back in four weeks. A flat fee of 5% applies, which translates into a 60% Annual Percentage Rate.

Borrowers will reportedly get a week as a grace period if they fail to pay the loan back after which a non-compounding interest of 1.25% would be applicable. 

Why It Matters

In March, Cash App announced it was donating money to users as the COVID-19 pandemic gripped the global economy.

The app has become Square’s largest source of revenue in its second quarter and brought in $281 million in gross profit out of a total revenue of $1.2 billion the company earned. 

Square offers Bitcoin purchase, stock trading, payments, and peer-to-peer money transfer through the Cash App. 

Price Action 

Square shares closed 0.56% higher at $139.02 on Wednesday.