As the $1.9 trillion American Rescue Plan (ARP) Act was signed into law on Thursday by President Joe Biden, eligible taxpayers could receive their third stimulus payments as early as this weekend.
Those with an adjusted gross income below $75,000 are eligible for the full $1,400 check, and married couples filing jointly below $150,000 will receive $2,800.
When considering how to spend the money, Mark Cuban, investor on ABC’s “Shark Tank” and owner of the Dallas Mavericks, recommends Americans who do not need to use it on essentials “pay off debt.”
“Pay off credit cards,” he tells CNBC Make It.
Indeed, credit card debt can quickly get out of control and be hard to pay off due to high interest rates and compound interest. The average APR, or annual percentage rate, for all credit card accounts is 14.87%, according to data from the Federal Reserve, and can rise to nearly 30% depending on credit score.
But “if you find yourself with money left over” after paying off debt, “put it in the bank,” Cuban says.
Just before the second round of stimulus payments were dispersed in December, Ellevest CEO Sallie Krawcheck gave similar advice.
“If you have debt with interest rates of 10% or more, we recommend not saving [the stimulus check]. Instead, use it to pay off that debt,” she previously told CNBC Select.
Other financial experts advise first considering whether the extra cash is needed to pay high-priority bills, including food and rent, or for emergency savings, which should cover three to six months of expenses, before using it to pay off debt.
Among them is Suze Orman, who told Yahoo Finance in March that Americans should save their stimulus check.
“If you don’t have at least an 8-to-12-month emergency fund, can you just save the money? Because we don’t know what’s going to happen,” Orman told Yahoo Finance. “We don’t know if Covid [is] going to surge again. We don’t know if those that don’t have jobs are going to get their jobs back.”
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank.”
Check out: Use this calculator to see exactly how much your third coronavirus stimulus check could be worth
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