New Stimulus Check May Provide Overdraft Relief, But Only Briefly

By Brooke Vaughan // December 23, 2020

Congress approved the second COVID-19 relief package of 2020, but overdraft fees are still likely for many Americans.
Courtesy of Karolina Grabowska/Pexels

Updated January 4, 2021

On Sunday, December 27, President Trump signed the second COVID-19 relief package of 2020. The $900 billion deal includes individual stimulus checks, extended unemployment benefits, and small business loans, among other measures. 

While Trump initially denounced the Congress-passed bill in a video on his Twitter account, attributing “ridiculously low” stimulus checks and other “wasteful and unnecessary items” as his primary concerns, the bill was ultimately passed as is, granting individuals $600 in direct payments and an additional $600 for each dependent. The package also added $300 in unemployment insurance benefits for the next 10 weeks. 

The stimulus check threshold follows the same income limits set forth by 2020’s earlier CARES Act, meaning it begins to phase out for those who earn more than $75,000 per year. 

While the stimulus checks, which have already begun dropping into people’s accounts, are welcomed by most, the reality is that these relief measures are both too little and too late. As 2020 drew to a close, Americans were in desperate need of financial relief. Unfortunately for many, a $600 check will hardly make a dent.

Read more about how Americans have been financially impacted by COVID-19 here

What a $600 Check Means for Americans

For people who were lucky enough to maintain their jobs through 2020, the new stimulus check could serve a couple of purposes. Many might put it into savings. According to the Pew Research Center, of the people who were able to put money into savings pre-COVID-19, 63% say they have been able to save as much as or more than they could save before the pandemic. Others who don’t save the $600 may use it to support local small businesses and in turn stimulate the economy. 

But not everyone has been so financially lucky. For the 6.7% of Americans — or 10.7 million people — who remain unemployed, a new stimulus check likely won’t keep a roof over their heads. The added $300 in unemployment benefits for the next 10 weeks, coupled with scattered housing relief measures, may be a saving grace for the next few months, but without further relief options, the future looks bleak for many.  

The average rent in the U.S. is around $1,463 per month, and the average mortgage is slightly less than that at $1,275 on a 30-year fixed rate. A $600 stimulus check does not begin to cover housing for a great deal of people in the U.S., let alone the $100-400 per month in utilities that is required to keep a home running.

With a looming global pandemic, hundreds of thousands of Americans are also dealing with lofty hospital bills. On January 3 alone, 125,444 Americans were hospitalized with COVID-19, according to the COVID Tracking Project. Under the two relief packages, insured and uninsured people alike can receive financial relief pertaining to COVID-related testing, treatment, and vaccination, but most people aren’t aware of these options, and bills pile up because of it. 

Stimulus Checks and Overdraft Fees

What happens when there isn’t enough money in your account to cover the necessary costs? You can expect an overdraft fee. With data provided by financial research company Moebs Services, CNBC projected that financial institutions raked in $30 billion in revenue from overdraft fees in 2020, more than double what they earned from overdrafts in 2019.  

Overdraft fees account for nearly 30% of the fees that Cushion detects on users’ accounts. Since Black Friday in 2020, more than 7% of Cushion users have received one or more overdraft fees. 

A new year has arrived, but the same financial stresses remain. If you’re looking to get your finances under control in 2021, you should take this time to vigilantly study your spending habits and opportunities for financial improvement. That way, when your relief check has been nearly exhausted by February, you’re better positioned for a future without overdraft fees.

What to Do Now to Avoid Post-Stimulus Check Overdraft Fees

Overdraft fees are one of the most common banking penalties in the U.S., up there with ATM fees, monthly maintenance charges, and NSF fees. While the threat of overdraft fees is unavoidable for some amidst a prolonged pandemic, there are preventative steps you can take. Here are three things you can do to avoid overdraft fees or get them refunded in the coming months.

Always know your account balance
Get into the habit of checking your account balance, and if you often forget, set up low-balance alerts. Banks are not legally required to notify you of overdrafts, so they could apply the fee and deduct money from your account without you ever having known. Keep a written or digital calendar of when automatic bills are scheduled to come out of your account so the charge won’t catch you off guard. 

Reassess your overdraft protection status
In 2010, it became mandatory for banks to require customers to opt into overdraft protection before charging overdraft fees. Believe it or not, not opting in could save you a ton of money.

Overdraft protection helps if you’d like peace of mind knowing you can withdraw money or make a purchase even if you don’t currently have enough money in your account. You can stay opted in, but make sure you’re evaluating all of your options. Rather than defaulting to the costly standard overdraft protection, you can link your account to another checking account, credit card, or line of credit. You might still get a fee with these options, but it’s typically a fraction of what a standard overdraft charge would be.

Negotiate a refund
Sometimes overdraft fees happen, but you don’t have to sit idly by. Call up your bank to request a refund; this process may be time consuming and frustrating, but it could also pay off.  

If you’d rather not deal with your bank, Cushion can negotiate your overdraft fees for you — and all other fees, for that matter. Sign up, select a package, and let Cushion take it from there. We monitor your bank accounts and credit cards for past and future fees, then automatically dispute overdraft fees and other penalties on your behalf.

Cushion negotiates bank and credit card fees so you waste less money, save more, and live a financially healthier life. It’s your money after all, and we’re here to help safeguard it. Since Cushion’s launch in 2018, our customers have received more than $5 million in refunds. We leverage artificial intelligence, advanced fee-detection technology, and bank-level encryption to put money back into your account—quickly, efficiently, and securely. More than that, we equip you with the tools for success by providing the most up-to-date data and insights in banking, news, and financial wellness.