IT COST AMERICANS MORE THAN $66 MILLION TO CASH THEIR FIRST STIMULUS CHECKS. WHY THAT COULD HAPPEN AGAIN WITH THE $1,400 PAYMENTS

Almost one year ago,
Congress authorized the
first $1,200 stimulus checks
to help Americans cope
with the unprecedented
coronavirus pandemic.

Most of those payments –
74% – were sent by direct
deposit to bank accounts.
However, some 22% of
Americans received the
payments by paper check.

People spent an estimated
$66.6 million in fees to
cash those checks through
retailers or check cashers,
according to a recent
report by the non-profit
organization Financial
Health Network and
published by Brookings
Institution.
With the next $1,400 checks
poised to go out, more
Americans may receive
them directly via their bank
now that the IRS has more
accounts on record.

Still, many individuals and
families will likely turn to
check cashers to access
the money sent by paper
checks and, as a result, may
incur fees they otherwise
would not have paid,
according to Aaron Klein,
senior fellow in economic
studies at Brookings.
In addition, the $1,400 will
be subject to garnishment
for certain debts.
Consequently, people could
turn to check cashers in
an attempt to prevent the
money getting siphoned
from their bank accounts.
Check cashers’ fees are
often lower than overdraft
fees, which may provide
another incentive for
people to turn to this
method to access the
stimulus money, Klein
said. What’s more, the
processing time is often
faster.
“Our payment system is
slow,” Klein said. “Time is
money.
“If you’re out of money and
you get a paper check on
Friday, how are you going
to feed your family on
Sunday?”
More than 3 million of
the first $1,200 payments
authorized by the CARES
Act were cashed through
check cashers, the
Financial Health Network
found.
Consumers tend to use
these services either

because they do not have a
bank account or they want to
sidestep their bank in order
to avoid fees or access the
money faster, according to
Dan Murphy, policy manager
at the Financial Health
Network.

Americans may have also
been avoiding garnishment
for unpaid debts, he said.
Of those who received the first
stimulus payment by paper
check, 6% indicated they
accessed the money through
a retail or convenience store,
according to the research.
Meanwhile, 3% said they used
a check casher.
The fees people pay to
use those check cashing
services vary. A retail store
like Walmart charges $8 for
checks worth more than
$1,000.
Check cashers’ fees vary
by state. A single person
may have paid up to $60 to
access $1,200 stimulus check
through a check casher,
while a married couple with
three children who received
$3,900 ($2,400 for the couple
plus $500 per child) could
have paid as much as $195,
according to the report.
Based on an average paper
check of $1,582.74, the report

estimates Americans who
used check cashers paid a
total of $66.6 million in fees.

Consumers who don’t have
a bank account or who want
to avoid bank fees may want
to consider depositing their
stimulus payments onto
prepaid debit cards, which
generally come with lower
fees, Murphy said.
Alternatively, a BankOn
certified bank account,
which can be opened online,
has no overdrafts and low
fees, he said.
The second $600 stimulus
checks were issued much
faster than the first $1,200
payments.
Still, those second payments
were sent on Dec. 29 but
generally did not reach
people’s bank accounts until
Jan. 4 – six days later, the
report points out.
Consequently, people who
needed help paying the rent
or other bills due Jan. 1 were
out of luck, Klein said.
The delay is a signal that the
U.S. has more work to do to
improve its ability to deliver
direct payments quickly, he
said.
In Singapore, for example,
the government can get
money to people in an hour,
Klein said. Meanwhile,
Amazon can deliver
anything in the world to your
door 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 it to them,” Klein
said. “Direct deposit isn’t
instant.”