Almost a year ago, Congress authorized the first $ 1,200 stimulus checks to help Americans deal with the unprecedented coronavirus pandemic.
Most of these payments – 74% – were sent by direct deposit to bank accounts. However, about 22% of Americans received payments by paper check.
People spent about $ 66.6 million in fees to cash these checks through retailers or check boxes, according to a recent report by the nonprofit Financial Health Network and published by the Brookings Institution.
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With the next $ 1,400 checks coming out, more Americans can receive them directly through their banks, now that the IRS has more accounts registered.
Still, many individuals and families are likely to turn to cashiers to access money sent by paper checks and, as a result, may incur fees they would not otherwise have paid, according to Aaron Klein, senior researcher at Brookings Economic Studies .
In addition, the $ 1,400 will be subject to attachment of certain debts. Consequently, people could turn to the check box in an attempt to prevent money from being diverted from their bank accounts.
Check collectors’ fees are often lower than overdraft fees, which could be another incentive for people to use this method to access stimulus money, Klein said. Furthermore, the processing time is usually faster.
“Our payment system is slow,” said Klein. “Time is money.
“If you are broke and receive a paper check on Friday, how are you going to feed your family on Sunday?”
How people used check casters
More than 3 million of the first $ 1,200 payments authorized under the CARES Act were cashed through check casters, the Financial Health Network found.
Consumers tend to use these services because they don’t have a bank account or because they want to get around their bank to avoid fees or access money faster, according to Dan Murphy, policy manager at the Financial Health Network.
Americans may also have avoided pledging unpaid debts, he said.
Of those who received the first stimulus with payment by check, 6% indicated that they accessed the money through a retail or convenience store, according to the survey. Meanwhile, 3% said they used a check box.
The fees that people pay to use these check cashing services vary. A retail store like Walmart charges $ 8 for checks that are worth more than $ 1,000.
Check collectors’ fees vary by state. A single person may have paid up to $ 60 to access the $ 1,200 stimulus check through a check box, while a couple with three children who received $ 3,900 ($ 2,400 for the couple plus $ 500 per child) could have paid up to $ 195, according to the report.
Based on an average check of $ 1,582.74, the report estimates that Americans who used check casters paid a total of $ 66.6 million in fees.
Consumers who don’t have a bank account or want to avoid bank fees may consider depositing their stimulus payments on prepaid debit cards, which generally come with lower rates, said Murphy.
Alternatively, a BankOn-certified bank account, which can be opened online, has no overdrafts and low fees, he said.
‘Direct deposit is not instantaneous’
The second $ 600 stimulus checks were issued much faster than the first $ 1,200 payments.
Still, those second payments were sent on December 29, but they generally didn’t reach people’s bank accounts until January 4 – six days later, the report points out.
As a result, people who needed help paying rent or other bills due on January 1 were out of luck, said Klein.
The delay is a sign that the United States has more work to do to improve its ability to deliver direct payments quickly, he said.
In Singapore, for example, the government can send money to people in an hour, Klein said. Meanwhile, Amazon can deliver anything from the world to your door in 48 hours, he said.
“I think a lot of attention has been paid in this bill to who should be eligible for stimulus payments and very little attention has been paid to how to get it to them,” said Klein. “Direct deposit is not instantaneous.”