What are the CARES, HEROES, and HEALS Acts and how do they affect me?
The Coronavirus Aid, Relief and Economic Security (CARES) Act was a financial stimulus plan intended to deliver direct economic support to millions of Americans. Passed by Congress in the early moments of the COVID-19 pandemic and signed into law on March 27, the Act granted qualifying adults up to $1,200 ($2,400 for joint incomes), plus an additional $500 per dependent.
Now, 2 additional stimulus bills are on the table. The Democrats’ HEROES Act passed the House in May but is awaiting Senate approval, while the Republicans introduced the HEALS Act to the Senate in July. Both bills include a second stimulus check, but are being held up because of disagreement between the 2 parties on the finer details.
Given the Republicans and Democrats agree on a second stimulus package in principle (if on little else!), there is still good reason to hope for a compromise.
Who will be eligible for the (possible) second stimulus check and for how much?
Like the CARES Act, both the HEROES and HEALS bills would grant $1,200 to single filers earning under $75,000 per year and $2,400 for joint filers earning under $150,000. The same formula would apply to the second stimulus check as to the first, whereby $5 is deducted from the check for every $100 above the income limit. This means single filers earning more than $99,000 and joint filers earning more than $198,000 would not be eligible for a stimulus payment.
Where the second stimulus checks would differ from the first is in how much money taxpayers get for dependents. Under the CARES Act, taxpayers received $500 for each dependent aged 16 and under. Both the Democrat and Republic versions of the second stimulus payment are more generous. Under the HEROES Act, tax payers would get $1,200 for each dependent, regardless of age and up to a maximum of three dependents. Under the HEALS Act, the figure is $500 for all dependents, with no age limit.
Like the first stimulus check, your eligibility for the second stimulus check will depend on your financial situation (according to your 2019 tax return, or your 2018 tax return if you haven’t yet filed for 2019). If you haven’t filed either, you’ll need to do so to receive any money.
When and how will I get my money?
Like the first stimulus payment, you’ll either receive the second payment by check or by direct deposit, depending on what information the IRS has on file for you. If the IRS doesn’t have your direct deposit information, you may want to update it: payments via direct deposit will typically be made more quickly—plus, you don’t have to worry about your check getting lost in the mail.
Because the COVID-19 relief money is only available via check and bank transfer, you’ll need to have a bank account to access it. If you don’t already have one, now’s the perfect time to open a new account. The easiest, fastest and cheapest way—and the one that requires the least contact with others—is to open an online bank account.
Online banks are secure and easy to use. Plus, you can open a new account in just minutes, which means faster access to your relief money.
Save or spend?
Wondering what to do with your second stimulus check, if it arrives (and your first stimulus check, if it’s still sitting in your checking account)? You have a few options, but your safest bet is to put it into savings.
First, you’ll want to make sure that you can pay for basic necessities. Before you think of doing anything else with that money, make sure your fridge and pantry are stocked up, and that rent and utilities are covered for the month.
Save for a rainy day
If basic necessities are taken care of, your next best move is to put the money into savings. In fact, there are a number of good reasons why a savings account is a better option than investing in stocks or buying cryptocurrency, especially now.
First of all, there’s a lot less risk involved—your money is guaranteed to earn interest and is federally insured up to $250,000. With the right online savings account, your money can earn plenty of interest. CIT Bank Online, for example, earns you up to 1.7% API while Capital One’s online-accessible savings account includes 1.5% API in interest. At nearly 20x the national average, these are good options for making sure your stimulus money continues to grow.
An online savings account can also help you save on fees. Many new online banking platforms like Chime and Discover, for example, offer no-fee savings accounts. If you’re opening an account for the sole purpose of putting away your stimulus check, this is a great option. For $1,000, what you lose in reduced interest rates you’ll more than make up for by not having any account fees.
Online banks can also offer a lot more flexibility. SoFi, for example, is another zero-fees online bank with a combined checking-savings account. You get all the great functions and easy access of a checking account, plus a 1.10% API interest rate worthy of an online high-interest savings account.
If you’re not ready to go fully digital, no problem. Hybrid banks like BBVA, for example, give you all the convenience of a traditional brick-and-mortar bank—access to physical branches, plus loans, mortgages and investment accounts—and all the perks of an online bank: an easy-to-use mobile app, alerts on suspicious activity, and Apple Pay and Google Pay.
If you don’t already have an online savings account, you may be missing out on interest and some great savings. If that’s the case, this is probably where your stimulus check should end up.
Invest it, carefully.
Finally, if you already have a healthy savings portfolio that includes an online savings account, you can invest your COVID-19 relief money. One way to get an immediate return on your money is to pay off any outstanding debts, to help you save on interest payments.
Otherwise, there are a few different ways to take advantage of the current financial climate in the stock market. An ETF, or Exchange Traded Fund, lets you invest in an entire sector or market, rather than individual companies, which can be a safer option. Alternatively, if you have some experience in the market, you can invest in companies that are likely to benefit from the world now and post COVID-19, like online learning platforms, video games, and grocery stores.
However, bear in mind that while the return may be greater than a high-interest online savings account, there are no guarantees here, and you may lose everything. Invest if you’re financially comfortable, but do so carefully.
The most important thing for most people will be making sure that their COVID-19 relief money is both safe and accessible when they have need of it, which generally means going for a savings account. Whether you opt for an account at a traditional bank or choose to leverage the financial advantages of going digital, this is the best option for those who have their basic necessities covered but aren’t in a position to risk the money by investing it.