Could Cash App Turn Friends and Family Into Banks’ Biggest New Competition?

Cash App customers can now convert peer-to-peer (P2P) money transfers into BNPL-like installment plans. It works this way. Customers choose an amount of a recent P2P payment they would like to convert into a short-term installment plan.

This new amount is based on the original transaction and an individual customer assessment. Next, this amount is put back into their balance plus a 7.5% upfront fee. This new amount is repaid through weekly installments.

Here is an example from a Cash App customer. Jeremy Estes from Little Rock, Arkansas, uses Cash App’s P2P pay-over-time product for recent personal payments such as bills and unexpected expenses.

“I thought [the pay over time for P2P product] was pretty awesome. If I send some money to somebody and then I ended up needing a little bit of it back, I can pull it back and borrow it pretty easy,” Estes said. 

Cash App Fees

Want to transfer money to a friend or family member? According to Cash App, it is free to accept money into a personal Cash App account. In addition, it is free to send money from a personal Cash App balance or from a linked debit card. There is a 3% fee to send money from a linked credit card. 

When withdrawing money from Cash App to a linked account, there are no fees for standard transfers. Standard transfers take up to three business days. For instant transfers, which are available in minutes, there are fees for withdrawing money ranging from 0.5% to 1.75%.

If customers decide to convert P2P money transfers into installment plans, they will pay a 7.5% fee. Money transfers of $25 or more made in the past 30 days are eligible for this pay-over-time feature, and repayments can be made over a period of six weeks. 

Using Cash App to pay friends or family is already an affordable option. And with the added convenience of turning a P2P money transfer into an installment plan for a fee of 7.5%, it gives the customer some additional flexibility.

Cash App Between Family and Friends

For Cash App customers looking for a short-term, repayment period and a flat fee, they may wish to convert a recent P2P money transfer into an installment plan. This type of lending product is simpler and faster than a traditional personal loan and often cheaper depending on factors like credit scores.

A 24-month personal loan has an average rate of 11.40%, according to the Federal Reserve. A personal loan also may charge an origination fee and late fees, and subprime borrowers often pay much higher APRs for loans.

A simple transaction of sending or receiving money through Cash App to family and friends is another inexpensive way to deal with a shortfall in cash.

So borrowing money from a family member or friend through an app such as Cash App is something to consider. But before borrowing, consider the interpersonal costs of borrowing. Will doing so hamper the relationship in any way? Is the money worth that risk?

For lenders, will these types of P2P transactions cut into their loan volume since they offer cheaper alternatives to traditional loans for non-prime customers? This is something to watch out for.

The Bottom Line

Installment plans are now part of P2P money transfers at Cash App. Here’s how it works. A customer chooses the amount of a recent P2P payment that they would wish to convert into a short-term installment plan.

And they then have up to six weeks to pay off the balance, which is based on the original transaction and an individual customer assessment, plus an upfront fee of 7.5%.

Making use of Cash App to pay and borrow money from family and friends is an affordable way to make these financial transactions. But before borrowing from or paying family and friends, consider the impact it may have on the relationship. Will it hurt the relationship? Will the money be difficult to repay? Is it worth the risk?