‘Don’t dump it on debt:’ Advice on using your COVID-19 stimulus check

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If your income has been disrupted, you should first use the COVID-19 stimulus check on things you absolutely must cover, such as food, and don’t worry about clearing your entire credit card balance right now. That’s according to Michelle Singletary, personal finance columnist. Credit: Pixabay. 

As part of the coronavirus relief package that Congress passed last month, more than 80 million Americans will get $1200 deposited directly into their bank accounts by the end of today. That’s according to the Internal Revenue Service. The government makes these deposits by using banking information you listed on your previous federal tax returns.  

For those who didn’t use tax refund direct deposits, they’ll receive their coronavirus relief checks in the mail. Those physical checks could be delayed a few days partly because the IRS is scrambling to put President Trump’s name on each check, per an order from the Treasury Department.

Michelle Singletary, personal finance columnist for the Washington Post, tells us what we need to know about receiving these checks. 

Who qualifies for $1200? It depends on your tax filing status and income

Individuals who make $75,000 a year or less. 

Couples who jointly make $150,000 or less. 

Then there’s a sliding scale: Your stimulus check is reduced $5 for every $100 over those income limits. 

Do you have to do anything to get this money?

You’ll get the money automatically — as a direct deposit or check — if you filed your 2018 or 2019 tax return. 

If you haven’t filed yet and want the stimulus check as a direct deposit, you have to give the IRS some info. Use the IRS’ new online tool called “Get My Payment.”

If you don’t make enough money to file taxes at all, will you still get a stimulus check? 

Yes. “Veterans, people who don't normally have to file … you don't have any income, you are definitely eligible for the stimulus payment,” says Singletary. 

You can also use the Washington Post’s stimulus calculator to estimate how much your stimulus payment will be. 

Donate your stimulus check? 

Singletary says many people won’t need the money, but will still receive it. 

“If that's you, I really encourage you to pass it onto someone who is in a greater need. Either donate it to a nonprofit or church or maybe somebody in your family that you know.”  

Keep your stimulus check — just in case?

Some people may not need the extra money right now, but they’re concerned about possibly being laid off later.

Singletary says, “If you have a disruption in your income, or you've been furloughed or laid off, the first thing you do is put it on necessities, food, rent, mortgage, the things that you absolutely have to cover. … If you haven't had a disruption but … you're in an industry that you can see the writing on the wall … absolutely save this money.”

Also, if you don’t have an emergency fund that could get you through six months, then you should save this money and build up that emergency fund, she advises. 

Credit card debt is not a priority right now 

“One thing you shouldn't do if you've lost your job, or you've had a disruption, or you think that you're going to be in financial jeopardy down the road ... don't dump it on debt," says Singletary. 

She calls herself a big get-out-of-debt person — but these are extraordinary times.

"Hold onto that money. So just make the minimum credit card payments. ... Down the road, you can catch up. And yes, that may mean that you're going to pay some interest that normally you may not have paid. ... But we are in a crisis in this country,” Singletary stresses.

Remember to ask lenders, landlords for relief 

Companies are giving forbearances for credit cards, mortgages, auto loans, personal loans — but you have to ask. 

Singletary says, “It's really difficult to get through to lenders right now, but you have to be patient, and you have to keep trying. So the major thing is to communicate, communicate, communicate.” 

That involves your landlord too. “Many areas and jurisdictions have said that they can't evict people for 60 or 90 days. And that's true. But you still should call your landlord and say, ‘I've lost my job. I'm not sure what's going to happen three months down the road.’ And just let them know what's going on.”

Eventually, you’ll still have to pay housing costs

Landlords may push off collecting rent and they can’t evict you for the next two to three months, but they’re not going to totally write off the rent. 

“A forbearance means you're just pushing the payment down the road. … There'll be lots of discussions about how you pay that money back. But just worry about what you can do for right now, and get the forbearance. … When we get to that point, then you can hopefully renegotiate how you will make those back payments.”

Same stimulus money, different costs of living 

All qualified Americans get the same amount of money, whether they live in LA or a small Montana town. The expenses are different. $1200 doesn’t fully cover rent for some Angelenos. 

Singletary explains that the government wanted to get the money into people's hands right away. 

“Right in the middle of a pandemic, there's not a lot of resources to try to figure out who deserves the money more, or [who deserves] maybe more money.

Now, Congress is talking about yet another stimulus package. Maybe they'll add more for people, you know, certain income ranges. But this is the best, I guess, they could do for right now.” 

—Written by Amy Ta, produced by Alex Tryggvadottir