How did Americans spend their stimulus checks? 

the crisis caused by the pandemic required alarge response. Well, it appears the response was large enough to boost the cash buffers of manylow-income families, many of whom had been living paycheck to paycheck, ahead of the stimulus insurgence of cash. However, it wasn’t enough to save everyone.

According to the Peter G. Peterson Foundation, a non-partisan organization dedicated to addressing America’s long-term fiscal challenges, federal stimulus in the form of one-time payments and the boost to unemployment benefits, had the greatest impact on the lowest income families.

One of the primary goals of the payments was to alleviate the economic hardship Americans faced due to the pandemic — especially for lower-income Americans, but the payments reached an estimated 85% of U. S households. According to a study by the American Enterprise Institute, the impact payments played a pivotal role in preventing many Americans from falling into poverty last year.

HOW MUCH STIMULUS MONEY?

The amount and eligibility requirements for each round of payments has varied.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed for a maximum of $1,200 per person, plus $500 per qualifying child.

The second round of payments under the Consolidated Appropriations Act, 2021, provided up to $600 per person, plus $600 for each qualifying child.

The most recent checks, included in the American Rescue Plan, were the largest — up to ments primarily for expenses as opposed to saving them or using them to pay off existing debt. The spending pattern changed for the second and third round of stimulus checks. Only one-fifth of households indicated they used, or planned on using, part of those latter payments for expenses like food and rent. Instead, the balance of individuals opted to either save the payments or use them to pay off debt.

Those spending patterns were even more pronounced by income level. While all households were more likely to have spent the first round of payments, higher-income families were more likely to have saved the money — a trend that was more noticeable for the second and third round of payments.

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DEBT DECREASED

While it’s not entirely clear yet how the payments have affected the economy, Americans definitely whittled down credit card debt and paid their bills on time more often during the pandemic, thanks largely to the stimulus payments and curtailed spending forced by the lockdown.

“The ongoing financial support for households, limited ability to spend the same during the pandemic as prior to it, and the widespread availability of

payment relief for borrowers have led to lower credit card balances and much lower delinquencies than we'd expected this time last year," Greg McBride,

Bankrate’s chief financial analyst told Yahoo Money

Between March 2016 and March 2020, the country’s collective credit card loans or balances grew by 29%, but those balances dropped after the

This single mother of three young children would have received $2700 from the first round of stimulus money ($1200 for herself and $500 for each child) $2,400 fromthe second stimulus package ($600 for herself and $600 for each child) and $5,600 from the third stimuls package ($1400 for herself and $1400 for each child) for a whopping $10,700. WHERE DID ALL THAT MONEY GO? pandemic’s arrival and one year later were 13% below the pre-pandemic high, according to an analysisof Federal Reserve Bank of St. Louis data by Nicholas Colas, cofounder of DataTrek Research.

“The question now becomes whether or not the American consumer really lets loose on spending in the months ahead,” McBride said, “and starts to run up the credit card balances again.”

PAYDAY LOAN COMPANIES WIN BIG “Debt collectors had a big year, and so did predatory lenders,” said Lauren Saunders, associate director at the National Consumer Law Center, a nonprofit that advocates for low-income borrowers.

It was an odd financial year that paid off well for them. There were those who already had payday loans and those who were forced to take them out early in the pandemic when the wave of job layoff first hit. It took a while for the stimulus to come through and for unemployment benefits to kick in, but when they did, individuals had funds to at least pay on their loans, if not pay them totally off. Instead of high levels of defaults, some of these high-interest lenders raked in record $1,400 per person, plus an additional $1,400 per eligible child. wz

All three rounds of payments were = primarily targeted at lower- and middle-income Americans, phasing out for incomes above $75,000 for single taxpayers, above $112,500 for taxpayers filing as head of 100% household, and above $150,000 for married couples filing jointly, However, the rate at which those payments phased out varied for each round.

HOW THE MONEY WAS SPENT?

How Americans spent the money varied

by stimulus round. The first round of funds was disbursed in April 2020, when the unemployment rate was at its highest (14.7%), and there-fore many households used the money to pay for expenses. According to a July 2020 US. Census Bureau’s survey, nearly three-quarters of U.S. households used, or planned on using, their initial $1,200 pay earnings. Remember a large number of people used their stimulus money to pay down their debt. Families earning less than $40,000 a year or without a college degree, applied 40% of their stimulus money towards paying down debt. It was a boon for some of the largest players in the industry.

However, while Corporate America was receiving near zero-rate loans, the poor  disproportionately Black and Brown were still paying off loans with interest

rates of 100 — 500%.

Afew months after Covid-19 was officially declared a pandemic, the National Consumer Law Center and other advocacy groups urged Congress to mandate a cap on the interest rates that could be charged on consumer loans. The idea, in part, was to provide desperate borrowers some relief, much like payment deferral programs put in place to help homeowners and students.

The provision never made it into the law.

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