After months of prolonged negotiations, with a government shutdown looming, Congress has settled on a $900 billion coronavirus relief deal that includes $600 direct payments for individuals and extends the lapsed $300 enhanced unemployment insurance payments for an additional 11 weeks.
Lawmakers are supposed to officially vote on the bill, plus a $1.2 trillion budget to fund the government through September 2021, today. According to Treasury Secretary Steven Mnuchin, Americans will start to see the $600 stimulus checks in their bank accounts as early as next week.
The new Covid relief package follows similar guidelines as the March CARES Act in distributing stimulus checks. This is who qualifies for the full stimulus check:
For every $100 earned over these income thresholds, payments are reduced by $5, up to a specified maximum income, phasing out completely at $87,000 for individuals and $174,000 for couples.
The deal is set to include direct payments of up to $600 to eligible adults, plus $600 per child dependent.
This means that, under the new relief package, a family of four will potentially receive $2,400, depending on if they meet the income requirements.
If you don't need your stimulus check to cover basic expenses, you've got some choices as to how you can put it to good use.
A solid option is to start an emergency fund, ideally putting it into a high-yield savings account. The Ally Online Savings Account ranks high on CNBC Select's list of best picks for savings accounts. The high-yield account earns more interest than traditional savings and comes with no minimum balance requirements or monthly maintenance fees.
However, if you have high-interest credit card debt, it may also be wise to put at least a portion of the stimulus check toward lowering your balance. Americans carry an average balance of $6,194 on their credit cards, which means interest could be adding up and outweighing any potential savings you've been stashing away, no matter how well you pinch your pennies.
Before you apply your stimulus check toward debt payoff, evaluate your job situation. If you've been recently laid off or had a reduction in working hours, or your worried about job security, it might be best to hold onto your check for a rainy day.
But if you have a good credit score, and you haven't applied for a new card or credit product lately, you could consider opening a balance transfer credit card with 0% APR so you can pay your debt off quickly without the high interest charges.
For example, with the Citi Simplicity® Card - No Late Fees Ever, you can get 18 months of no interest to help rapidly reduce your balance (then 14.74% to 24.74% variable APR). This card does come with a 5% balance transfer fee (minimum $5) but the amount you save on interest often makes up for the cost.
Keep in mind that balance transfer cards typically require a credit score of at least 670 (subject to approval), and you may not be able to transfer all your debt depending on the credit limit you receive and the terms of the offer.
If you're interested in using this chance to get a head start on debt payoff, learn about our picks for best balance transfer cards with no fees.
While many Americans were frustrated the second round of stimulus checks were smaller than the first, it's still an unexpected influx of cash that can be put to good use. If you're financially stable, you might want to consider spending 20% of it on something fun and using the remaining 80% for debt pay off or for an emergency account. Whatever you choose, you can't go wrong putting the extra cash toward something that will improve your overall financial health and peace of mind.