Suggestions for Using Your Stimulus Check

If you qualify for an Economic Stimulus payment, and filed a timely 2007 federal income tax return, you've either received your IRS stimulus check already or you soon will (they're being issued through July). What should you do with it? Of course, the retailers want you to spend it, and many of them are coming up with enticing offers to get you to do just that. "Use your stimulus check to buy a gift card with us and we'll add an extra 10% to the balance." "Load your stimulus check onto our bank card and we'll waive the issuance fee."

Well, you could do that, but be aware that in doing so you're tying up all your money with one gift or bank card, and not all the fees associated with them may be waived. So, before you leap into one of these offers, consider these other ideas for how to use your stimulus check:

Cash the check and use the money where you want. By doing so, you aren't bound into spending all the money with one retailer, like you are with gift cards, or forced to leave a small balance remaining on the card because it's not enough to cover the cost of any merchandise the issuer sells. What's more, with cash you won't be subject to any maintenance fees or expiration dates, like you may be with bank cards.

Pay (or prepay) a bill. The lump sum provided by your stimulus check may be just what you need to pay your real estate tax, car insurance, or dentist for that root canal. Or, you might start a prepayment plan with your home heating contractor to lock into a fixed fuel price for the coming winter.

Start or add to your emergency fund. We all know we should have at least 3 to 6 months worth of living expenses in a cash reserve account. If you don't have a sufficient cash reserve, you might deposit your stimulus check in a savings account (or money market account or short-term CD) to create (or augment) that fund. You'll earn some interest on your deposit, and most such bank accounts are FDIC-insured.

Pay off some or all of a high-interest debt. If you have outstanding credit card balances, give some thought to paying off some or all of those balances, starting with the balance that carries the highest interest rate. For example, if you apply $600 toward a credit card balance with an annual percentage rate (APR) of 14.9%, you could save almost $90 in interest charges over the course of a year.

Invest in the future. You could start (or add to) a tax-advantaged vehicle such as a 529 plan, a Coverdell education savings account, or (if you're eligible) a Roth or traditional IRA.

In the end, the stimulus check is yours to do with as you wish. So, if you want to shop until you drop, you can. But consider this: It may be best to pay yourself first.