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E-mail StoryPlans for rebate checks aren't so stimulating
| Tuesday, Apr 29 2008 6:54 PM
Last Updated: Wednesday, Apr 30 2008 7:23 AM
Rebecca Bush hasn’t received Uncle Sam’s economic stimulus check yet, but she’s already got plans for it, and they aren’t glamorous.
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19 percent: pay off debt
16 percent: pay utility bills
10 percent: pay for home repairs
7 percent: travel expenses
4 percent: buy new furniture or appliances
2 percent: buy a new car
(Sample answers. The survey was done March 6 to 12, and included 1,000 adults randomly selected across the country. Sampling error is plus or minus three percentage points.)
Source: Experian Consumer Direct
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Rebecca Bush, 24, a stay-at-home mom, said, "We'll probably pay bills. Gas and groceries are way too high. I just had to get a smaller car because of gas."
Elizabeth Hill, 60, said, "I'm retiring in a couple of years so I'm going to get as (many) of my bills paid down as possible so I can play when I retire. I don't think the economic stimulus plan is going to work at all with the economy the way it is. Nobody can afford to buy anything. People have to pay down bills."
Maria Maldonado, 69, a retiree, said, "I need about that much to fix my car, but I also need to pay bills and, wow, gas is ridiculous. I might just save it for gas, later."
“We’ll probably pay bills,” said the 24-year-old stay-at-home mom who lives in southwest Bakersfield. “Gas and groceries are way too high. I just had to get a smaller car because of gas.”
That’s a pretty common response from Bakersfield area residents looking forward to receiving a federal check intended to boost the economy.
Under the Economic Stimulus Act of 2008, more than 130 million households that filed a 2007 tax return will receive tax rebates beginning in May. The payment varies depending on income, but typically is no more than $600 for a single person or $1,200 for a married couple filing a joint return. Eligible taxpayers may receive an additional $300 for each child who was under age 17 as of Dec. 31.
But it’s a measure of how far household budgets are stretched that some people plan to spend the money on basic necessities. In a recent survey by Experian Consumer Direct, for instance, 16 percent of respondents said they planned to pay utility bills with their rebates, and 19 percent said they’ll pay down debt.
“Daily living is getting more expensive,” said Jose Garcia, an analyst with public policy organization Demos and author of the report, “Borrowing to Make Ends Meet.”
“Energy costs are up 20 percent over last year, groceries are up 5 percent, and credit card delinquencies and defaults are increasing,” he said. “I think most people are going to have to use this money just to stay afloat.”
If that happens, Garcia added, the government may not get the spending jolt it hopes for.
In March, soaring food and energy costs pushed the Consumer Price Index up 0.9 percent over February, the Bureau of Labor Statistics reported earlier this month. The index tracks the price of the most common items Americans buy.
U.S. food prices have risen 4 percent since last year, according to the U.S. Department of Agriculture, and are projected to go up another 4 percent this year, the agency predicts. Meanwhile, travelers are bracing themselves for still higher gas costs over the summer, and battling record increases in credit card debt. For those carrying a balance, the median credit card debt was $5,100 in 2004, the latest figure available from the Federal Reserve Board.
Waitress Elizabeth Hill, 60, of northeast Bakersfield, will be paying down debt with her stimulus check.
“I’m retiring in a couple of years so I’m going to get as much of my bills paid down as possible so I can play when I retire,” she said.
But stores are doing their best to entice consumers to splurge. At the very least, they’re putting items on sale to draw traffic. Some will cash your check for you.
Among retailers scheduling special promotions to coincide with the arrival of the checks are Home Depot, Lowe’s and Radio Shack. The consumer electronics retailer is giving a 10 percent discount on purchases of $50 or more when a federal stimulus check or IRS tax refund is used as a form of payment. The unspent balance is loaded on a prepaid gift card.
Consumers who bring their checks to Sears or Kmart can get a gift card for the value of the check, plus a bonus card worth an additional 10 percent. The cards can be redeemed at Sears, Kmart or Lands’ End retail stores or online at Sears.com or www.Landsend.com. The offer is valid through July 19.
“In this tough economy, we know that our customers are focused on how to make their money work harder for them,” W. Bruce Johnson, interim CEO of Sears Holdings, said in a statement.
Tough, indeed. That’s why east Bakersfield retiree Maria Maldonado, 69, isn’t biting.
“I need about that much to fix my car, but I also need to pay bills and, wow, gas is ridiculous,” she said. “I might just save it for gas, later.”