It cost Americans more than $ 66 million to cash their first stimulus checks. Why that could happen again with the $ 1,400 payments

Almost a year ago, Congress approved the first $ 1,200 worth of stimulus checks to help Americans cope with the unprecedented coronavirus pandemic.

Most of these payments – 74% – were made by direct deposit into bank accounts. However, about 22% of Americans received payments by check.

People spent an estimated $ 66.6 million in fees to cash these checks through retailers or check cashers, according to a recent report by the nonprofit Financial Health Network published by the Brookings Institution.

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With the next $ 1,400 checks soon to run out, more Americans will be able to get them direct through their bank as the IRS has more accounts registered.

Still, many individuals and families are likely to turn to the cashiers for access to the money sent by checks. As a result, you may incur fees that you would not otherwise have paid, said Aaron Klein, senior fellow in business studies at Brookings.

In addition, the $ 1,400 will be garnished for certain debts. As a result, people could turn to the cashiers to prevent the money from being withdrawn from their bank accounts.

Check cashier fees are often lower than overdraft fees, which can be another incentive for people to turn to this method to access the stimulus money, Klein said. In addition, the processing time is often faster.

“Our payment system is slow,” said Klein. “Time is money.

“If you run out of money and get a check on Friday, how are you going to feed your family on Sunday?”

How people used check cashiers

More than 3 million of the first $ 1,200 payments approved by the CARES Act were cashed through check cashers, according to the Financial Health Network.

Consumers typically use these services either because they don’t have a bank account or because they want to bypass their bank to avoid fees or access money more quickly, according to Dan Murphy, policy manager at the Financial Health Network.

Americans may also have avoided garnishment on unpaid debts, he said.

Of those who received the first stimulus payment by check, 6% said they accessed the money through a retail or convenience store, according to the study. Meanwhile, 3% said they used a check cashier.

The fees for using these check cashing services vary. A retail store like Walmart will charge $ 8 for checks worth more than $ 1,000.

Check cashier fees vary by state. A single person may have paid up to $ 60 to access $ 1,200 for stimulus check through a check cashier, while a couple with three children paid up to $ 3,900 ($ 2,400 for the couple plus $ 500 per child), according to the report.

Based on an average paper check of $ 1,582.74, the report estimates that Americans who used check cashers paid a total of $ 66.6 million in fees.

Consumers who don’t have a bank account or want to avoid bank fees should consider depositing their stimulus payments on prepaid debit cards, which generally come with lower fees, Murphy said.

Alternatively, a BankOn-certified bank account that can be opened online has no overdrafts and low fees, he said.

“Direct deposit is not instant”

The second $ 600 stimulus checks were issued much faster than the first $ 1,200 payments.

Those second payments were sent out on December 29, but generally didn’t reach people’s bank accounts until January 4 – six days later, the report said.

As a result, people who needed help paying rent or other January 1 bills would have been out of luck, Klein said.

The delay is a signal that the US has more work to do to improve its ability to deliver direct payments quickly, he said.

In Singapore, for example, the government can bring money to the people in an hour, Klein said. Meanwhile, Amazon can get anything in the world to your doorstep within 48 hours, he said.

“I think too much attention was paid in this bill to who should be eligible for stimulus payments and too little attention was paid to how to get there,” Klein said. “Direct deposit is not instant.”

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