Economic Impact Payments: Uses, payment methods, and costs to recipients

Executive Summary

When the COVID-19 crisis struck the United States in the spring of 2020, it posed a threat not only to the physical health of Americans but also to their financial health. The crisis found most Americans in financially vulnerable or coping positions, and many with incomes that barely made ends meet, high levels of debt, and low levels of savings that would not sustain them through the crisis. Recognizing that the social safety net in the U.S. would not be sufficient to support individuals and families through this crisis, several provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act were intended to provide economic relief. Among these relief provisions were “Economic Impact Payments” (EIPs), direct payments to individuals and families broadly available to all of those making under specified income thresholds. As policymakers implemented these payments they ran into a number of challenges, such as identifying eligible recipients and distributing payments efficiently. In this report, the Financial Health Network draws upon publicly-available data and our own U.S. Financial Health Pulse to estimate how long recipients waited to receive their EIP, what fees some might have paid to access their EIP, and how recipients used their EIP. The report also compares EIPs under the CARES Act to the more recent round of $600 direct payments created by the Consolidated Appropriations Act enacted at the end of 2020. Our findings include the following:

• One in 20 eligible recipients still had not received their CARES Act EIP after six months.
• Only 45 percent of CARES Act EIPs were distributed in the first wave. Under the Consolidated Appropriations Act, 77 percent were distributed in the first wave.
• It took almost four months to distribute 90 percent of CARES Act EIPs. Under the Consolidated Appropriations Act, it took less than three weeks.
• One in 10 Americans received a paper check under the CARES Act, despite having a bank account.
• Over three million paper checks from the CARES Act were cashed through check cashers.
• A family of five could have paid $195 or more in check cashing fees in some states.
• CARES Act EIP recipients paid an estimated $66 million in check cashing fees.
• The most common uses of CARES Act EIPs were spending, housing, and bills.

The report concludes with recommendations for policymakers to ensure that future direct stimulus programs run more smoothly, as well as a brief discussion of financial infrastructure shortcomings and strengthening the social safety net.

Click here to download the full report.