The second U.S. stimulus payments could arrive soon. Here’s what to consider before you spend it.

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Stimulus 2.0 – the next round of coronavirus relief checks valued at up to $600 each – might show up in your bank account just in time to cover a weekend splurge.

Stop and think a bit before you head to the mall or casino, though, and ask yourself: Is there a bill that’s going to need to be paid come January or February? And am I even getting any money this time around?

The second round of Economic Impact Payments – or what the IRS has called “EIP 2” – is generally $600 for singles and $1,200 for married couples filing a joint return. If you have young children, you could receive more money.

An extra $600 is available for each child who qualifies. But just like the first round of stimulus payments, an age limit is in place and parents aren’t getting the extra $600 for dependents who are 17 and older.

How will the stimulus cash be sent?

The stimulus dough could arrive very quickly. But before you pull out your checkbook, take time to make sure the money is really in your account. Consumers are well advised not to automatically assume that the cash will show up how you might think.

Money is being spread across the economy to consumers in three different ways: Direct deposit into bank accounts, the mailing of paper checks and via new and existing government-related debit cards. Hint: Don’t throw out a new blue Visa debit card if one suddenly pops up in the mail.

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The direct deposits were to hit bank accounts as early as Tuesday night or later.

Yet the Internal Revenue Service warns: “Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of Jan. 4, 2021.”

Consumers need to realize that Jan. 4 is the effective date when the U.S. Treasury will actually transfer funds to the institutions for credit to the individual accounts, according to bankers.

It’s expected that during this round of Economic Impact Payments there will be 113 million payments made via direct deposit and 34 million payments made through paper checks and prepaid cards.

The IRS is going to use what information it has to ship out the money. If you somehow closed a bank account that the IRS had on file, for example, the IRS notes you’re likely to receive the payment as a check or debit card in the mail.

Economic Impact Payment checks will continue to be mailed in May and run through June, and possibly later. In this April 23, 2020,  photo, President Donald Trump's name is seen on a stimulus check issued by the IRS to help combat the adverse economic effects of the COVID-19 outbreak.  (AP Photo/Eric Gay, File)
Economic Impact Payment checks will continue to be mailed in May and run through June, and possibly later. In this April 23, 2020, photo, President Donald Trump’s name is seen on a stimulus check issued by the IRS to help combat the adverse economic effects of the COVID-19 outbreak. (AP Photo/Eric Gay, File)

If you’re set to receive a paper check, the checks are to be mailed out Dec. 30, according to the IRS statement.

“For Social Security and other beneficiaries who received the first round of payments via Direct Express, they will receive this second payment the same way,” the IRS stated.

What should you do if stimulus money isn’t there next week?

If you don’t see stimulus cash in your bank account by early January, watch your mail for a paper check or even a debit card. Again, please don’t throw out any of the new debit cards that pop up in the mail, as some consumers did for the first round of stimulus payments earlier this year.

“The Economic Impact Payment Card will be sent in a white envelope that prominently displays the U.S. Department of the Treasury seal,” the IRS stated.

The Visa name is on the front of this plastic card. The issuing bank is MetaBank and listed on the back of the card. For more information about these cards, see EIPcard.com.

A limited number of payments are being sent out by debit card. Even if you got a check the last time for the stimulus, you could get a debit card this time.

A Visa Debit card, like the one pictured, is being issued to 4 million people who have yet to receive stimulus money, or Economic Impact Payments. Consumers are being told that the cards are not a scam.
A Visa Debit card, like the one pictured, is being issued to 4 million people who have yet to receive stimulus money, or Economic Impact Payments. Consumers are being told that the cards are not a scam.

“The form of payment for the second mailed EIP may be different than for the first mailed EIP. Some people who received a paper check last time might receive a debit card this time, and some people who received a debit card last time may receive a paper check,” the IRS said.

A “Get My Payment” tool at IRS.gov also might help you track the payment, if necessary, in the future. “The tool is being updated with new information,” the IRS said, “and the IRS anticipates the tool will be available again in a few days for taxpayers.”

Don’t call the IRS

What the IRS doesn’t want you to do is call them.

“The IRS reminds taxpayers that the payments are automatic, and they should not contact their financial institutions or the IRS with payment timing questions,” according to an IRS statement issued Tuesday evening.

You do not need to register to receive the second payment, if you’re eligible. And again, everyone is not eligible. Those with higher incomes, for example, could get less than the maximum amount or might not receive anything.

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Eligibility for the payments starts to phase out at modified adjusted gross incomes of $75,000 for single filers and $150,000 for joint filers. Since the latest $600 stimulus payment is half of the maximum stimulus that we saw in the spring – which was then $1,200 for singles or up to $2,400 for married couples – the complete phase out will hit more families this time around.

The stimulus payment is cut by $5 for every $100 of income earned above the thresholds. For example, a couple earning more than $174,000 won’t get a second stimulus payment – that compares to the $198,000 cutoff with the spring payments. Single people making more than $87,000 wouldn’t get stimulus money now.

Calculate what money you owe already

What you shouldn’t do is just spend the money without considering your existing debt.

The financial hardship that millions of families have experienced won’t disappear overnight here. And the temporary payment pauses won’t last forever.

The temporary pause for student loan payments, for example, right now is set to end Jan. 31 after a second extension was announced in early December.

Stimulus cash that was part of the coronavirus relief package will continue to roll out via direct deposit and actual checks in April and early May, though some may get their money later.
Stimulus cash that was part of the coronavirus relief package will continue to roll out via direct deposit and actual checks in April and early May, though some may get their money later.

Federal student loan borrowers are not expected to make payments through January but, unless that coronavirus-related deal is extended again, the federal student loan payments would have to resume in February. Again, remember, private student loan payments weren’t covered by this deal.

Many families also pulled out credit cards to cover some holiday bills. About 31% of all consumers took on debt to pay for holiday expenses this year, according to a December 2020 MagnifyMoney survey of 1,171 Americans. Those who incurred holiday debt this year borrowed $1,381 on average, according to MagnifyMoney.

If you can, it’s smart to use that extra cash to pay down expensive credit card debt.

Or you might want to hold onto that extra cash to cover rent or mortgage payments if necessary later in 2021.

On the plus side, the National Consumer Law Center notes: “The new payments . . . may not be offset by the federal government for student loans, other federal debts, or back child support owed to state child support enforcement agencies. The new payments are protected from garnishment by debt collectors.”

Many people – especially those who have been able to continue working during the pandemic – may be able to spend this cash and splurge. The economic outlook for 2021 is expected to improve in the spring and summer, especially if the rollout of the vaccines moves along. The jobs picture won’t fully recover, economists say, for another two years or so.

Yet the latest $600 checks could indeed be the last stimulus checks we might see. A move to boost the payments to $2,000 has run into Republican roadblocks in the U.S. Senate, so it might not be wise to bank on that deal.

Contact Susan Tompor via stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.

This article originally appeared on Detroit Free Press: Second stimulus: What to note, how you should spend it





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