Your Federal Stimulus check could come with its own good news/bad news feature. The good news: You’re getting $1,200. The bad news: Your bank might take a bite out of that money.
As part of the $2 trillion Coronavirus Aid, Relief and Economic Security Act, or CARES Act, adults are receiving up to $1,200 each and an additional $500 for each child to help offset the economic strain caused by measures to combat the pandemic. Those funds might be deposited directly into checking or savings accounts. The amount each person receives depends on his or her income level.
With diminished wages, lost jobs or decreased business revenue, some consumers may have overdrawn bank accounts and unpaid overdraft fees. Though many banks have so far opted not to do so, they could take from your stimulus funds to remove a negative balance in your account.
How Does the Direct Deposit of Your Stimulus Check Work?
Taxpayers can receive their stimulus money either via a mailed paper check or through direct deposit. The IRS created a section on its website called Get My Payment, where people can log in to see the status of their payment. The website is updated once a day.
Taxpayers who gave the IRS their bank information in the past because they received refunds will receive their stimulus funds from a direct deposit.
If your bank account is closed or the bank information is invalid, the deposit will be rejected by the bank. Instead, the IRS will mail a check to the most recent address. After a payment is mailed, you should receive it in 14 days or less.
Your bank account number comes from either your 2018 or 2019 tax return, the information provided via the IRS Get My Payment application, or from the nonfilers section.
What Are the Rules for What Banks Can Do With Your Stimulus Funds?
The CARES Act does not stop private debt collectors from taking the stimulus money for outstanding debt. The federal act only stops federal and state agencies from garnishing your money, unless it is for court-mandated child support.
While many banks have opted not to pay themselves first if you are overdrawn on your account or owe overdraft fees, other private creditors are allowed to access the stimulus funds, depending on where you live.
The CARES Act allows each state to apply its own rules on whether the stimulus funds can be seized by creditors. Taxpayers could see their stimulus funds taken unless their state has installed protections. Check with your governor’s or attorney general’s office to determine if your state has such protections.
Are Banks Planning to Give You a Break?
Many banks have opted to defer negative balances, whether accounts are overdrawn or have overdraft fees attached, so that consumers can receive 100% of their stimulus checks.
Here are the policies by some larger banks.
- Ally Bank: The bank says it notified people who received a stimulus check and had a negative balance that they would automatically receive a credit to their accounts. “This went beyond the pause we’ve seen from others; it was a permanent credit,” says Gene King, Ally’s director of public relations.
- Bank of America: “We are deferring any negative balances so that clients can get access to the full stimulus payments,” says Bill Halldin, Bank of America senior vice president and media relations executive. “That applies whether it’s a direct deposit or check. No need to open up another account.”
- BBVA: BBVA will apply stimulus funds to debts owed to “third parties, such as garnishments, in accordance with applicable law,” says Christina Anderson, senior vice president and director of external communications. The stimulus funds will be deposited into open accounts and “applied to the balance, including negative balances and minimum payments due on overdraft protection lines of credit. Economic impact payments customers with open, overdrawn accounts are encouraged to call the bank to request possible overdraft fee refunds.”
- Chase: “We are temporarily crediting the overdrawn amount for customers when they receive a stimulus payment, giving them full access to the funds,” says Paul Lussier, vice president, external communications, digital and technology for Chase. “We hope this gives them a chance to catch their breath.”
- Citibank: The bank temporarily won’t apply stimulus deposits against negative balances, Bloomberg News reported.
- USAA: USAA reversed its earlier decision and is no longer garnishing money from stimulus payments. The bank won’t collect against negative balances for 90 days, USAA told media outlets.
- Wells Fargo: “Wells Fargo will pause the collection of a negative deposit account balance existing at the time your stimulus payment was deposited for 30 days,” the bank says on its website.
Check Holds: What You Need to Know
What Should You Do to Protect Your Stimulus Check
Check your bank balance by either logging in online or through a mobile app or by calling the bank to determine if the stimulus payment has been credited to your account.
People who are concerned that their bank or credit union might seize part of their stimulus paper check could try to open a new bank account instead. Many banks offer free checking accounts without requiring a minimum opening deposit.
The National Consumer Law Center recommends that people who have garnishment orders move their stimulus funds out of an at-risk account. Money cannot be garnished from an account until the bank is served with a garnishment order, the law center says. Consumers could also benefit from the fact that some courts are closed or not operating electronically, which stalls or delays garnishment orders.
“If a bank account is at risk of a new garnishment order that has not yet been served on the bank, the consumer has some time to move the stimulus payment out of the account to prevent seizure,” writes the NCLC.
