There's a new scam and it could entice you to put a big purchase on credit and pay it off with a supposed stimulus check.
"Rumors spread online Friday that the U.S. government will soon be issuing stimulus checks to taxpayers in certain income brackets," reported The Associated Press (AP) on August 15. "CLAIM: The Internal Revenue Service [IRS] and the Treasury Department have approved $1,390 stimulus checks that will be distributed to low- and middle-income taxpayers by the end of the summer," AP continued.
But this is a cruel and dangerous hoax, which could cause real damage to consumers who might be tempted to splurge ahead of the imaginary checks' arrival. It presents particular risks to those preparing to make mortgage applications, especially cash-out refinancers and first-time home buyers.
When AP checked with the IRS, it was told that no stimulus checks (aka economic impact payments) are scheduled. It is true that a Senate bill that would enable certain checks to be issued was introduced last month.
But, so far, this has gone nowhere. And, absent Congress passing legislation enabling the distribution of funds, stimulus checks would be illegal.
A huge risk to consumers
There is a real danger that consumers who believe the hoax could damage their finances. Why not put an 85" smart TV on your credit card or use a Buy Now, Pay Later deal so you can drive it home this evening? Government money is virtually on its way to pay for it, so what's the harm?
Of course, giant TVs are just an example. Most families have a mental list of things they'd like but can't afford: some minor home improvements, perhaps, or a visit to far-off parents, siblings or friends. Crossing a few of them off before a "promised" stimulus check arrives is bound to be tempting.
When that check doesn't materialize, people who are already struggling may well find their credit score harmed as they try to juggle bills to stay in control. For a homeowner hoping for a cash-out refinance to reset their finances, a damaged credit score means higher mortgage rates and monthly payments.
The same applies to first-time home buyers. And a higher mortgage rate could be the difference between your affording the home of your dreams and having to settle for a less desirable place.
Stimulus checks later? Maybe
It was U.S. Senator Josh Hawley (R-Mo.) who last month introduced the American Worker Rebate Act, legislation that would send rebate checks to working Americans. And he specifically tied it to tariff revenues.
"Like President Trump proposed, my legislation would allow hard-working Americans to benefit from the wealth that Trump’s tariffs are returning to this country,” Hawley wrote. So, there is a chance of stimulus checks at some point, though you might think that late next summer is more likely than this.
Whether they materialize at all will probably depend on how tariffs play out. Many economists worry that they will cause a spike in prices and slow the economy, creating "stagflation." That's STAGnant economic growth combined with higher-than-desirable inFLATION.
Other economists, mostly government supporters, are convinced it will generate strong growth without unduly raising prices. By next summer, we should see who's correct.
If the tariff skeptics are right, the government will need to stimulate the economy and appease consumers ahead of the midterm elections, due Nov. 3, 2026. If economists who support tariffs are vindicated, the government may prefer to use the revenues to curb the ballooning deficit.
