Your Bank Could Take Some of Your Stimulus Check

Your federal stimulus search can include a good news/bad news section. The good news is that you will receive $1,200. The bad news is that your bank can take a bite out of your funds.

Adults will receive up to $1,200 each, with an additional $500 for each infant, as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARERS Act, to help mitigate the economic burden caused by pandemic-fighting measures. These funds could be directly deposited into a checking or savings account. His or her level of income determines the sum each person receives.

Some customers may have overdrawn bank accounts and unpaid overdraft fees due to lower incomes, job losses, or reduced business sales. While several banks have chosen not to do so so far, they will use your stimulus funds to offset a negative balance in your account.

How Does the Direct Deposit of Your Stimulus Check Work?

Taxpayers may choose to receive their stimulus funds via paper check or direct deposit. The IRS has a Get My Payment section on its website where people can log in to check their payment status. Once a day, the website is changed.

Taxpayers who previously submitted their bank account details to the IRS in return for refunds will obtain their stimulus funds via direct deposit.

The bank will refuse your deposit if your bank account is closed or your bank information is incorrect. The IRS will instead send a check to the most recent address. You should obtain your payment in 14 days or less after it is mailed.

Your bank account number can be found on your 2018 or 2019 tax return and the IRS Get My Payment application or the IRS website’s nonfilers section.

What Are the Rules for What Banks Can Do With Your Stimulus Funds?

The CARES Act does not prevent private debt collectors from using stimulus funds to pay off unpaid debts. Unless it’s for court-ordered child care, the federal act just prevents federal and state governments from garnishing your wages.

While many banks have chosen not to reimburse themselves first if you are overdrawn on your account or owe overdraft fees, depending on where you live, other private creditors will be able to access the stimulus funds.

Read Also: What To Know About Stimulus Checks Via Debit Card

The CARES Act gives each state the authority to determine if creditors can take stimulus funds. If their state has put in place safeguards, taxpayers’ stimulus funds will be taken. To determine whether your state has such safeguards, contact your governor’s or attorney general’s office.

Are Banks Planning to Give You a Break?

Many banks have chosen to postpone negative balances, whether overdrawn or subject to overdraft penalties so that customers will collect their stimulus checks in full.

The following are the strategies of some of the larger banks.

  • Ally Bank: People who got a stimulus check but had a negative balance were told that their accounts would be automatically credited, according to the bank. Gene King, Ally’s director of public relations, says, “This goes beyond the pause we’ve seen from others; it was a lasting credit.”
  • Bank of America: Bill Halldin, Bank of America senior vice president and media relations executive, says, “We’re deferring any negative balances so that clients can get access to the full stimulus payments.” “Whether it’s a direct deposit or a check, there’s no need to open a new account.”
  • BBVA: According to Christina Anderson, senior vice president, and director of external affairs, BBVA will allocate stimulus funds to debts owed to “third parties, such as garnishments, in compliance with applicable law.” The stimulus funds will be deposited into open accounts. They will be available for use immediately “negative balances, and minimum payments due on overdraft security lines of credit are added to the balance. Customers with free, overdrawn accounts who receive economic impact payments are advised to contact their bank to inquire about potential overdraft fee refunds.”
  • Chase: “When consumers receive a stimulus payment, we temporarily credit their overdraft, allowing them to complete access to the funds,” says Paul Lussier, vice president, external relations, digital, and technology at Chase. “We’re hoping this will allow them to catch their breath.”
  • Citibank: Bloomberg News announced that the bank would not apply stimulus deposits to negative balances for the time being.
  • USAA: USAA has changed its mind and will no longer deduct money from stimulus payments. USAA told media outlets that the bank would not collect on negative balances for 90 days.
  • Wells Fargo: According to the bank’s website, “Wells Fargo will pause the collection of a negative deposit account balance that existed at the time your stimulus payment was deposited for 30 days.”

Read: How To Get a High Credit Score

What Should You Do to Protect Your Stimulus Check?

To see if the stimulus payment has been credited to your account, log in online or through a mobile app, or call the bank.

People who are worried that their bank or credit union will seize a portion of their stimulus paper check should open a new bank account. Many banks offer no-fee checking accounts that do not require an initial deposit.

According to the National Consumer Law Center, people with garnishment orders should move their stimulus funds out of an at-risk account. According to the law center, money cannot be garnished from an account until the bank has been served with a garnishment order. Consumers may also benefit from the fact that some courts are closed or do not operate electronically, causing garnishment orders to be stalled or delayed.

“If a bank account is threatened with a new garnishment order that has not yet been served on the bank,” the NCLC writes, “the consumer has some time to move the stimulus payment out of the account to avoid seizure.”

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