The burden of medical debt may soon become much lighter for millions of Americans.

The Consumer Financial Protection Bureau proposed a rule Tuesday that aims to remove medical bills from credit reports and prevent credit reporting agencies from sharing medical debt information with lenders. The rule would also forbid lenders from basing their lending decisions on medical information.

The proposal isn’t expected to be finalized until early 2025, and it could face challenges. Here’s what to watch out for and what you can do now to protect your credit.

Why this matters

“Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans,” CFPB Director Rohit Chopra said in a press release Tuesday.

New safeguards could prevent medical debt from blocking consumers’ access to loans such as mortgages and could elevate credit scores.

Americans who have medical debt on their credit reports may see a 20-point bump in their credit scores on average, the CFPB says.

Beyond its effects on credit, the rule would provide protections that could impact consumers’ health and safety: It would prevent lenders from taking medical devices, such as wheelchairs, as collateral for loans or repossessing medical devices if a loan isn’t repaid.

How does this proposal differ from recent changes to medical debt reporting?

Currently, paid medical bills don’t appear on credit reports or affect credit scores. In April 2023, unpaid medical bills with a starting balance of less than $500 were removed from reports.

Also, as of July 2022, paid medical collections were erased from credit reports, and they are no longer reported by the three major credit bureaus — Equifax, Experian and TransUnion.

Despite the changes, a CFPB report found that more than 15 million Americans still had medical collections on their credit reports as of June 2023. People living in the South and low-income communities were disproportionately affected.

The new proposal would remove all medical bills from credit reports, including unpaid bills of any amount.

Would this rule apply retroactively?

Yes. If finalized, the rule would remove existing medical collections from credit reports and prevent credit reporting companies from sending medical information to lenders going forward.

Will there be exceptions to the rule?

The CFPB says there will be “very limited circumstances” where medical information could still be used in credit decisions, such as where disability income needs to be taken into account for loan consideration or to determine if someone is eligible for medical forbearance.

What to look out for next

The CFPB is accepting comments on the proposal through Aug. 12. The timeline will become clearer once feedback is addressed, but the rule is expected to be finalized early next year, a CFPB official said on Tuesday’s press call.

The 2024 election could also influence the fate of the proposal as well as similar consumer credit protections. A Biden administration fact sheet issued Tuesday cites a recent budget proposal from the Republican Study Committee that calls for defunding the CFPB.

What you can do now

Use AnnualCreditReport.com to check your credit reports for free. Make sure any medical debt information that appears is accurate and in line with the current reporting rules. Unpaid medical collections with an initial balance under $500 shouldn’t be on your reports and neither should paid collections.

If you spot an issue, dispute the error with the credit bureaus right away. Regardless of whether the CFPB’s proposal is finalized, it won’t forgive medical debt or stop medical debt from going to collections. Make a plan to deal with any medical debt you may have. Review your budget and seek help if needed. Your medical provider may be willing to work out a payment plan to help you better manage the bill.

Lauren Schwahn writes for NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.

The article Medical Debt Could Vanish From Credit Reports. What to Do Now originally appeared on NerdWallet.

More U.S. consumers may need help managing their credit card payments. Roughly 6.9% of credit card users were in serious delinquency in the first quarter of 2024 — the highest rate since historic lows in 2021 — according to the Federal Reserve’s latest quarterly report on household debt and credit, released May 14.

If you’re behind on your credit card payments and looking for a solution, you might be considering debt settlement, which promises to help clear your debts. However, debt settlement is risky and should be a last resort for most borrowers.

How does debt settlement work?

Debt settlement is the process by which your debts are settled for less than you owe. Though you can settle debts yourself, many borrowers hire a for-profit debt settlement company.

Here’s how it works: A debt settlement company will ask you to stop making payments on your debts and instead funnel that money into an escrow account, which is a separate account set up by the settlement company. As your debts become increasingly delinquent, the settlement company will approach your creditor with an offer, using the money in the escrow account. Ideally, the creditor accepts the offer, with the thinking that some money is better than none. Then, your debt is cleared for the lesser amount.

Debt settlement isn’t free. Debt settlement companies may charge a fee of 15% to 25% of the amount you owe for each successful settlement. For example, if you owe $10,000 and the debt settlement company charges a fee of 25%, you’ll pay a $2,500 fee (in addition to the settled amount).

The average debt settlement client saves $1,440 after fees, or 31.9% of their debt burden, according to a 2023 economic impact report commissioned by the American Association for Debt Resolution.

Risks of debt settlement

Though debt settlement may sound promising, it can be a “very bumpy road,” warns Bryce McNitt, chief of staff for market offices at the Consumer Financial Protection Bureau. Settling your debts can take two to four years, and there are serious consequences to falling that far behind on payments.

“You very well could be in collections at that point, and your credit score will dive down,” McNitt says. “You could also face pressure tactics from collectors. If you’re getting calls, if you’re getting a lawsuit, that’s very stressful.”

As interest and fees from your creditor pile up, you’re reducing any potential savings that debt settlement promises.

There’s also no guarantee a company can settle your debt. Some creditors won’t accept a debt settlement offer or work with debt settlement companies. Any debts you successfully settle may further hurt your credit score, since settled accounts stay on your credit report for up to seven years.

“Theoretically, there could be some use cases where it can work out, but I think the risks are just too high for most people,” McNitt says.

Other ways to tackle overwhelming debt

There are other, less-risky ways to get credit card debt under control.

Financial experts widely recommend debt management plans. These plans are offered by nonprofit credit counseling agencies and roll multiple unsecured debts into one at a lower interest rate, which makes the debt easier to pay off.

Debt management plans won’t hurt your credit score, and they have lower fees, but many people don’t know about them, says Justin Botimer, partner development manager at GreenPath Financial Wellness, a nonprofit credit counseling agency.

“The reality is our industry doesn’t have the big budgets that for-profit companies have,” Botimer says. “We hear all the time, ‘I wish I would have known about you sooner.’ This is after they’ve been wrangled into debt settlement.”

A debt consolidation loan is another alternative. You use the money from a loan to pay off your debts in one fell swoop, then pay back the new loan in fixed monthly installments, ideally at a lower interest rate. But debt consolidation loans can be tough to qualify for, because you need a strong credit score. Some credit unions and online lenders offer debt consolidation loans for borrowers with bad credit (629 score or lower).

If there’s no way you can repay your credit card debts, you can try to settle them yourself. Creditors are often willing to settle with borrowers directly, Botimer says, which saves you from paying a hefty fee to a debt settlement company and may preserve your relationship with the creditor. If the creditor won’t settle, you can ask for other relief options, like a reduced interest rate or lower monthly payment.

Bankruptcy may be an option for people whose debt payments account for a significant portion of their income. Though it may temporarily hurt your credit, bankruptcy can protect you from aggressive action from creditors, like lawsuits or wage garnishment.

Jackie Veling writes for NerdWallet. Email: jveling@nerdwallet.com.

The article Is Debt Settlement a Good Idea? originally appeared on NerdWallet.

Of the debt held by the major credit card issuers, 82% of that amount is revolving — that is, carried over from month to month — according to the 2023 Consumer Credit Card Report from the Consumer Financial Protection Bureau. The same report found that 1 in 10 personal credit card accounts are charged more in interest and fees than is paid toward the principal each year.

When you’re paying so much just in interest, credit card debt can feel like an impossible weight to shed. But there’s a way to pause those crushing interest charges, at least temporarily, with a balance transfer credit card. By moving the debt to a balance transfer credit card with a 0% APR promotion, you won’t pay any interest for the 0% term, which can be as long as 21 months.

Transferring a balance to a new credit card is just part of the process, though. After the debt has been relocated, you’ll need discipline to focus on paying it off before that promotional window closes and interest charges resume on the remaining balance.

Here are three tips to help maximize a balance transfer credit card’s interest-free period.

1. Calculate your monthly payment

Most debt payoff strategies require a plan of some kind; using a balance transfer credit card to become debt-free is no exception. First, identify the length of the 0% period, usually listed as a number of months. Then, divide the total balance transfer amount by that number. The result is the amount you’ll need to pay each month to get rid of the balance before interest kicks in.

For example, if you owe $15,000 on the credit card after the balance transfer and the 0% APR period is 15 months, you’d have to pay $1,000 per month to zero out the debt before the term expires.

Note, however, that the calculation above doesn’t take into account the one-time upfront balance transfer fee that you’ll likely owe. This fee, typically between 3% to 5% of the transferred balance, can be costly. For a $15,000 balance, a 3% fee would add $450 to the debt amount. But if you would save more than that amount in interest charges over 15 months by transferring the debt — which is likely in this scenario — such a fee is worth paying.

Even when a debt is sheltered by a 0% promotion, you’ll probably be required to make at least a minimum payment every month on the transferred balance; otherwise, you’ll risk losing the promotion entirely. When it comes to paying off debt, it’s not all or nothing. Better to make a payment, even a small one, every month.

2. Prioritize debts

Take stock of all your debts, including the one on the balance transfer credit card, and figure out which ones to pay off first. One option is to pay off the loans with the highest interest rates first, also known as the “debt avalanche” method. This can save more money in interest over time compared with using the “debt snowball” method, in which you pay off the smallest debt first regardless of the interest rate, to help you score quick wins in your debt battle and build momentum.

Either method can be helpful, but there are times when you may want to make an exception to your chosen approach. For instance, it may be wise to prioritize loans with variable interest rates, or loans whose current interest rates will increase in the future. Debt moved to a balance transfer credit card with a 0% APR period is a perfect example. After the 0% promotion ends, the interest rate will likely shoot up to double digits.

As of February 2024, the average APR on interest-accruing credit cards was 22.63%, according to the Federal Reserve. Credit card interest rates will generally be much higher than the APRs on other debts such as a mortgage or car loan, so it may be best to eliminate the debt on the balance transfer card first, even if it isn’t your highest-interest debt.

Other possible exceptions can be mortgages and student loans. The interest you’re paying on these loans is sometimes tax-deductible, which means you’re being reimbursed for part of that interest in the form of a smaller tax bill. So you may want to move those debts lower on your priority list to tackle others that lack such tax advantages.

Overall, the order in which you pay off debts matters less than having a clear plan that accounts for the loan type and interest rate, as well as a payoff strategy that best suits your personality.

3. Have a Plan B

A year or more free of interest is indeed a long time, but a lot can happen — say, a job loss or unexpected expenses — to derail your plan to pay off debt before the 0% period on the balance transfer card ends.

Know that there still are ways you can pay off your loan without accruing too much interest. Here’s how.

• Transfer the remaining balance again. Before the promotional APR window closes, consider transferring your outstanding debt to another balance transfer card. Most major credit card issuers offer several cards with 0% periods. You might also apply for a card from a credit union, which tends to have lower interest rates than cards from bigger banks. To go this route, think strategically about eliminating the debt especially since you’ll incur a balance transfer fee each time you move the debt.
• Ask for a lower interest rate. Maybe you don’t want to go through the hassle of moving debt to another credit card. You could contact your current card issuer and ask for a lower interest rate. The issuer may be more willing to work with you if you’ve been a loyal cardholder with a history of on-time payments. Your request may not be granted, but you won’t lose anything by asking.
• Enlist help from a nonprofit credit counseling service. This option may be best for people who have multiple debts. A credit counselor can determine whether you’re eligible for a debt management plan that consolidates debts. As part of that plan, a counselor can negotiate interest rates on your behalf and help you develop healthy financial habits. Make sure the agency you work with is a nonprofit and accredited, such as the National Foundation for Credit Counseling or Money Management International.

The process of paying off debt is often described as a journey, and journeys tend to contain valuable lessons. If you find yourself in need of a balance transfer card as a tool to pay off debt, try to use the experience as an opportunity to scrutinize your spending habits and develop a plan for avoiding credit card debt in the future.

Jae Bratton writes for NerdWallet. Email: jbratton@nerdwallet.com.

The article 3 Steps to Take After Transferring a Balance to a New Credit Card originally appeared on NerdWallet.

While the term “emergency fund” is used widely in the personal finance world to refer to short-term savings, some financial experts say the term isn’t helpful for everyone — and may even be harmful.

“I’ve never liked the term,” says Pamela Capalad, certified financial planner and co-founder of See Change, a financial coaching program for creators of color. She prefers to use descriptions like “the yes box,” “a savings cushion” or even a “rainy day fund” — anything that doesn’t have the word “emergency” in it.

Capalad says the term “emergency savings” evokes fear in people and suggests you’re just waiting for something terrible. “Saving is already so hard for people to do, and the fact that you’re saving for something bad to happen instead of something good to look forward to is not something that motivates people to save,” she explains.

Still, others in the industry remain fans. “I personally find the term helpful,” says Jason Ewas, senior policy manager at the Aspen Institute Financial Security Program, a nonprofit based in Washington, D.C. The public widely recognizes and gravitates toward that term, he says, adding that “emergencies happen to everyone.”

When it comes to your short-term savings account, financial experts suggest considering the following:

Focus on functionality over nomenclature

Whatever you call your savings account, it should have some key features, says Chris Peterson, founder and CEO of Penny Forward, a nonprofit that serves people with and without vision loss. First, it should be the right size for you, which varies by person. While the standard advice recommends building up to three to six months’ worth of essential expenses, Peterson says that amount is so large that it’s unrealistic for many people.

Instead, Peterson suggests aiming for around $2,500 of short-term savings, which would cover the cost of an appliance breaking or typical car repairs. “By having $2,500 in the bank, people are setting themselves up to be more resilient,” he says. Of course, if that amount also feels daunting, saving any amount, however small, can also help.

Most importantly, a short-term savings account should be liquid and flexible, Ewas says. In other words, it should be easy to withdraw the money for any type of unexpected need that pops up.

“The features and functionality are just as important as the terminology. It has to be easy to open, no-fee, protected and something people can get out immediately. That’s the fundamental thing,” says Brian Gilmore, vice president at Commonwealth, a nonprofit focused on financial security.

Use it then rebuild it

The term “emergency savings” can make people overly hesitant to use the money for anything other than a catastrophe, Peterson says. It can be more helpful to think of the money as part of a “revolving door” where you can borrow from yourself instead of from a bank. After you use the money when a need pops up, you want to replenish the funds as soon as you can, he says.

Automating contributions, such as through direct deposit if your employer offers it, makes the rebuilding easy. Or consider enrolling in an account through your bank or credit union that automatically pulls money from your paycheck into a short-term savings account, Ewas says. Putting money in an federally insured high-yield savings account can also help it grow and remain safe without much effort.

Employer-sponsored savings accounts make it easy to automate savings and in some cases offer sign-up bonuses, matches and other incentives. “It’s like a 401(k) in that it’s sponsored by an employer. It’s automated through payroll,” says Devin Miller, co-founder and CEO at SecureSave.

Choose the term that works best for you

In the absence of a universally embraced term, people can choose their own wording, Ewas says. In fact, he does just that in his personal life. He uses multiple savings accounts and gives them specific labels for each purpose, such as labeling one for vacations. “That mental bucketing is really important,” he says.

Peterson likes using the term “opportunity fund” with clients because it recognizes the potential of what they might be able to do with that money. “They might be looking to accept a job opportunity or go to school to better their lives, and in those cases, having savings is very helpful,” he says.

Capalad urges people to use the term that most motivates them to save. “It’s your ability to say yes to something awesome,” she says.

Whatever you call it, Capalad says, “that’s the representation of your freedom.”

Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

The article Rename Your ‘Emergency Fund’ if That Suits Your Saving Style originally appeared on NerdWallet.

For some, “digital nomad” evokes the image of a young, unencumbered tech worker sending emails from the beach. Indeed, three-quarters of digital nomads are under age 40, according to a 2023 survey of over 1,200 digital nomads by Flatio, an online accommodation platform.

Yet some families have joined the digital nomad lifestyle, leaving their belongings — and the idea of a “home” — behind as they travel the globe. The lifestyle may not afford families the same hammock-swinging freedom that digital nomads without children enjoy, but these adventurous parents say the trade-offs are worth it.

“We really like the whole adventure,” says Chris Oberman, founder of Moving Jack, a blog about his family’s trips around the world. “Normal things like going to the supermarket become really special because it’s a new experience.”

Originally from the Netherlands, Oberman, his partner, their 6-month-old baby and their two cats are currently in Iraq. They plan to move to South Korea this summer.

“Logistically, it requires a lot of planning,” Oberman says. “Before we move abroad, we return to our home country to arrange all necessary documents. Since we don’t own a house, we either stay with family or rent a place. When we depart for our new destination, we stay in a temporary place such as a serviced apartment or hotel that allows cats (which isn’t easy to find).”

In the midst of this explanation, the power went out.

“The power goes out five times a day,” Oberman says with a laugh, highlighting some of the unexpected challenges of living abroad with a family.

Schools and social circles

Schooling poses one of the biggest challenges to families living on the road. Oberman’s infant is too young for school, so that’s not an issue, but other digital nomad families must get creative when it comes to education.

“Our decision on where to go is influenced by factors such as having internet access to educational opportunities for our kids, safety and cost of living,” Vasilii Kiselev said in an email. Kiselev is from Florida, and his family of four is currently nomading in Portugal. “[We] incorporate local culture and history into their learning experience.”

This approach reflects an educational movement called “world schooling,” an unofficial term that describes an educational approach centered around cultural immersion. Some, like Kiselev, still seek formal education while traveling, while others combine nomadism with homeschooling. The Facebook group “Worldschoolers” has over 67,000 members.

And while it might sound challenging for children to get uprooted regularly, Kiselev, whose children are ages 8 and 12, suggests that adjusting to nomadism is a matter of practice.

“They have adapted well to the lifestyle,” Kiselev said.

Changing friend groups and even languages from one month to the next can be a challenge for anyone, never mind a child. Oberman says he’s aware of the social difficulties that lie ahead for his son.

“As he makes friends, it could be tough for him.”

Budgets and trade-offs

Raising kids is expensive whether at home, abroad or on Mars.

It’s easy to be daunted by the cost of traveling full time with a family, especially given how expensive a few weeks’ vacation can be. Yet many nomadic families are able to maintain a budget when living full time on the road.

Kiselev’s family budgets about 1,500 to 2,500 euros ($1,629 to $2,715) per month for housing.

“It’s pricey but necessary for a comfortable living space.”

Another cost is private school, which costs Kiselev about 500 to 1,000 euros ($543 to $1,086) per month, or $6,516 to $13,032 per year — an attractive price for many U.S.-based parents in high cost-of-living areas.

For comparison, according to a study last updated in October 2023 by the Education Data Initiative, a research group focused on the U.S. education system, the average annual private school tuition across grade levels K-12 in Massachusetts is $25,061, and California’s average is $16,637.

Of course, that doesn’t include last-minute hotels, airfare, travel insurance and all the other expenses accrued from shuttling a family around the globe. Oberman’s family found themselves flying back and forth from Iraq to the Netherlands and Dubai during the pregnancy because of concerns about the quality of health care in Iraq. Those expenses can add up in a hurry and swamp any savings from lower overall costs of living.

Yet many families find the financial trade-offs worth it in terms of the experiences they and their families are able to accrue.

“Showing our child so much of the world is very rewarding and helps him grow with a global perspective,” says Oberman.

Sam Kemmis writes for NerdWallet. Email: skemmis@nerdwallet.com. Twitter: @samsambutdif.

The article There Are New Digital Nomads on the Block: Families originally appeared on NerdWallet.

It’s college graduation season, a time to celebrate the years of hard work and effort you’ve invested in your education and career development. Hopefully, the future feels full of endless possibilities. But there’s also an undeniable reality: those possibilities cost money.

One antidote to the uncertainty you might feel about your financial future is to put together a plan. Here are five first steps you can take now.

1. Build a budget you can stick to

The best budgets account for your needs, wants and financial goals. A 50/30/20 budget might be a good place to start.

The idea is to spend 50% of your take-home income on needs including housing, utilities, groceries transportation and minimum monthly debt payments. The next 30% of your income goes toward wants, like travel, monthly subscriptions and entertainment. The last 20% should go toward savings goals and paying down debt.

While your circumstances — like living in a high-rent area — might require more flexibility, this is a good framework for managing your monthly income. The key is to find a budgeting approach that’s sustainable.

2. Stash some cash in an emergency fund

Now is the time to start setting aside some extra cash for the unexpected. If you were lucky enough to get money as a graduation gift, consider using it to start an emergency fund.

“It’s important just to start building up some cash,” says Jaime Eckels, a certified financial planner and wealth management partner with Plante Moran Financial Advisors in Michigan. “The very basics should be just having three to six months, at least, of living expenses on hand.”

This type of savings could take years to build, so starting with smaller goals can make it feel more attainable. Having $500 saved could be enough to avoid going into debt, but any amount will make a difference. Consider putting your emergency fund in a high-yield savings account, which can have annual percentage yields (APYs) of 5% or more and will grow your balance more quickly.

3. Be proactive about student loan repayment

The federal student loan landscape has changed dramatically in recent years, as a result of the COVID-19 pandemic and Biden administration policies. The key to making on-time payments and staying on top of debt is being a proactive manager of your student loans.

Because there’s a six-month grace period after you graduate, “it’s easy to get complacent,” says Winston Berkman-Breen, the legal director for the Student Borrower Protection Center. “But there are things you can do to make your month-to-month payments work for you.”

First, set up online accounts with your student loan servicer and studentaid.gov. You’re assigned a servicer when you take out your loans, and you’ll manage repayment through this servicer.

Activating your accounts can help you get a sense of your loans and ensure the servicer and federal government can contact you, says Berkman-Breen. You can find the name of your servicer and link to their website by logging into your studentaid.gov account and checking the upper right-hand side of the dashboard.

A common mistake graduates make, according to Berkman-Breen, is not knowing they have a choice when it comes to picking a repayment plan. “You can move pretty fluidly” between repayment plan options, says Berkman-Breen. Income-driven repayment plans, like SAVE, can lower your monthly payments and lead to eventual loan forgiveness. And generally, you can switch plans anytime.

To estimate what your payoff journey would look like on different repayment plans, use the Education Department’s loan simulator.

4. Enroll in a retirement plan and get the employer match — if you can

While retirement feels like a lifetime away, taking advantage of the retirement plan your employer offers at your first job will pay off big down the road.

You’ll likely be offered enrollment in a defined contribution plan like a 401(k) or 403(b). Eligible employees can contribute money toward retirement, typically through a payroll deduction. These are fairly easy to set up and can make saving for retirement something you don’t have to think about.

Do your best to take advantage of an employer or company match, where employers match employee contributions up to a certain percentage. If your employer offers a full match on contributions up to 5% of your salary, but you contribute 3%, you would lose out on the extra 2% of “free money” from your employer. This could make a meaningful difference in retirement, so if you can make it work in your budget, it’s worth it.

5. Check your credit score and review your credit report

Your credit score is the gateway to much of your financial life, and the first step to growing your score is knowing what it is. You can check your credit score for free with personal finance websites like NerdWallet, or find it on your bank’s app.

If you already have established credit, focus on making on-time payments each month, and use 30% or less of the total credit available to you. Set up alerts on your credit cards to know when you’re approaching that threshold.

If you’re new to credit, you have options. Find a trusted person with a strong credit history and become an authorized user on their account. You can benefit from their positive credit history without being responsible for payments. Also, consider enrolling in a rent-reporting service to get credit for on-time rental payments.

Next, use AnnualCreditReport.com to download a free copy of your credit report. Look for things you don’t recognize, like accounts or names. Set a calendar alert to check on your credit report quarterly so you can catch mistakes or dispute errors quickly before they damage your credit. Credit scores can feel mysterious, but you have what it takes to build a strong score.

Don’t be afraid to ask for help

As you work through this financial checklist, remember that you don’t need to have it all figured out right away.

“Asking for help is very important, and if you can start off on a strong foot, the future is very bright,” says Eckels. You don’t always need to turn to a financial advisor, she says. Your parents, family and friends are also valuable resources.

Amanda Barroso writes for NerdWallet. Email: abarroso@nerdwallet.com.

The article 5 Financial Steps for New College Grads in Their First Jobs originally appeared on NerdWallet.

If you sell your home after the middle of August, cheers: You could end up pocketing the money that previously would have gone to the buyer’s agent.

But before you celebrate, consider the downside of waiting until late summer to list your home for sale: House prices tend to fall after August. The price drop might surpass the money you save on commission.

New policies governing real estate commissions are set to go into effect Aug. 17 as a result of the settlement of an antitrust lawsuit. The amended policies give home sellers more room to negotiate what to do about the buyer’s commission — whether they want to use it to induce competitive bids or keep it to themselves entirely.

The choices complicate this season more than usual, for both buyers and sellers. Here’s what to know to help you and your agent come up with the best strategy for you.

What, exactly, is changing?

Starting Aug. 17, sellers will no longer set the commissions for real estate agents who represent buyers. Buyers will decide how much their agents will be paid. Even when sellers are willing to pay some or all of the commission for the buyer’s agent, the amount will no longer appear on the multiple listing service.

For decades, and up to Aug. 17, MLS listings have been required to advertise how much commission the seller is offering to buyer’s agents. The information wasn’t visible to home buyers but could be viewed in agent-only fields of the MLS.

When sellers set commissions for buyer’s agents, they’re sometimes advised that offering a low commission will attract fewer buyer’s agents — and therefore fewer competing offers. The plaintiffs in the antitrust suit argued that the policy of requiring commission info on the MLS was designed to discourage them from negotiating lower commissions for buyer’s agents.

Can sellers start offering 0% to buyer’s agents today?

Technically, sellers have always had the option of offering zero or minimal commission to the buyer’s agent. But most sellers have offered such commissions to motivate buyer’s agents.

Even though they will set their agents’ commissions, buyers won’t necessarily pay out of pocket. Buyer and seller will negotiate who will pay. Scenarios include:

• The money may come directly out of the seller’s pocket, as has been the norm.
• The money may come directly out of the buyer’s pocket.
• The buyer and seller may split the payment.
• The buyer may pay indirectly, by adding their agent’s commission to the price of the house when they make an offer.

Here’s an example of how an indirect payment might work for a buyer who is paying a 3% commission. The buyer finds a house costing $400,000. The 3% commission is $12,000. The buyer offers $412,000 and asks the seller to transfer $12,000 to the buyer’s agent at closing.

Keep in mind that sellers, having equity, tend to have more access to cash than first-time home buyers, who accounted for 33% of buyers in April. A seller who’s willing to pay all or some of the buyer’s commission may end up with more offers, and a higher final price, than one who flatly takes that commission off the table.

How much money could sellers keep, though?

As a home seller, you stand to save thousands of dollars on commissions if the buyer pays their agent directly or indirectly.

Let’s say the agents in your town typically collect 2.5% on each side of the transaction, and you sell your house for $400,000. Each agent earns $10,000. If you pay both agents, you’ll shell out $20,000 and end up with $380,000.

But if the buyer pays their agent, you would pay your agent $10,000 and walk away with $390,000. That’s $10,000 more.

On the other hand, buyers might request bigger closing cost credits, subtracting from the seller’s bottom line, Chuck Vander Stelt, a real estate agent in Valparaiso, Indiana, said in an email. Or buyers might offer less because they will bear the expense of paying their own agents.

Even after Aug. 17, sellers might keep offering commissions to buyer’s agents as motivation, Vander Stelt added. These offers could remain standard in many markets, multiple agents said. Offering commissions to buyer’s agents will still be permissible under the new policies, but those offers will no longer appear on the MLS. Listing agents can communicate the information on brokerage websites, or in phone calls, emails and texts.

What would be the cost of waiting?

You might be tempted to keep your home off the market until the new policy goes into effect. But waiting might not be a wise move, because it would mean sitting out homebuying season.

Home prices peak from May through August, then drop off. In 2023, the median existing home cost $410,100 in June, $405,600 in July, $404,200 in August — and $392,700 in September, according to the National Association of Realtors. If you list your house after mid-August, you probably won’t close until October or later, when prices are even lower.

With house prices peaking in summer, you might come out ahead by selling during the busiest time of the year, even if you end up paying the buyer’s agent’s commission.

“I don’t really have anybody holding off until after August to list their house because they want to save a couple bucks,” says Michelle Doherty, an agent in northern Virginia with RLAH Real Estate. She says her clients will be ready to sell in June or July, “depending on how things progress with prepping the house.”

Can I negotiate the listing agent’s commission too?

You might save money if you don’t pay the buyer’s agent’s commission. But what about the commission that you pay the listing agent for selling your home? You might not see an immediate reduction. If a cut in commissions from 3% to 2% is your hope, you’ll probably mope.

“First of all, nothing’s going to change quickly, OK?” says Stephen Brobeck, senior fellow for the Consumer Federation of America. “The industry will resist, and consumers don’t really focus on this much.”

Vander Stelt said that he sees headlines that proclaim “the end of the 6% commission.” That’s a mistaken belief, he said. “Overall, the average commission costs per transaction on a percentage is likely to come down over the coming years,” he said. But not instantly.

What if I list before Aug. 17 but sell after?

Months can pass between the day you put your home on the market and the day you hand over the house keys at closing. What if the Aug. 17 policy change happens in the middle of this period? The National Association of Realtors provides guidance for two scenarios:

• Your home’s MLS listing offers to pay the buyer’s agent’s commission, and you sign the contract accepting the purchase offer before Aug. 17: You’ll pay the commission, even if the closing occurs on Aug. 17 or after.
• Your home’s MLS listing offers to pay the buyer’s agent’s commission. But in accordance with the new policy, that offer is removed from the MLS on Aug. 17. Sometime after that date, you accept the purchase offer: That defunct commission offer on the MLS is no longer valid. You and the buyer will negotiate how to take care of the buyer’s agent’s commission.

When you put up your home for sale, you’ll sign a listing agreement with your agent. NAR says that listing agreement might have to be amended if it says that an offer to pay the buyer’s agent must be made “on the MLS.” As of Aug. 17, that clause in the listing agreement will conflict with the new policy. Your agent might ask you to sign an amended listing agreement before that date.

Holden Lewis writes for NerdWallet. Email: hlewis@nerdwallet.com. Twitter: @HoldenL.

The article Should I Wait Till August to Sell My Home to Save on Commission? originally appeared on NerdWallet.

Combining finances with a partner can happen at any stage of your relationship, even if you’ve been married to your partner for a long time. It can be a great opportunity for a couple to get on the same page about what they want their financial future to look like, especially when it comes to big considerations such as child care, homeownership and retirement.

An academic study published in the Journal of Consumer Research in 2023 found that couples with joint bank accounts experience less financial conflict and greater harmony within their relationships. The study results indicated that couples who merged their finances had a strong sense of financial partnership. In contrast, couples with separate bank accounts tended to operate in a more “tit for tat” financial exchange.

If you and your partner feel like it’s time to combine your finances, here’s how you can work toward merging your money.

Taking the plunge on merging finances with your partner

Perhaps you’ve kept your finances separate out of convenience, but now you’re getting tired of making online transfers to your partner for every shared expense. Or maybe you’ve got a considerable expense coming up and you want to streamline your accounts.

Jen Mayer, an accredited financial counselor and founder of the Brooklyn, New York-based firm Fully Funded, often works with couples who are deciding whether to combine their finances after a long time together. The first thing she likes to do is retrace the couple’s steps.

“When helping these couples, we usually want to know why their finances weren’t merged originally,” Mayer says. “There may be some beliefs about money from someone’s childhood — like maybe their parents had a bad marriage with a lot of conflict around money — that led them to want to keep their finances separate. We have to work out those beliefs first.”

Once a couple is aware of potential hang-ups around money, they can communicate more about their money management, goals and expectations as they begin the merging process. They might find that shared bank accounts can make their lives easier, but they also might choose to partially merge their accounts and keep separate accounts as well so each partner can have independent spending money.

Ultimately, if you’re married, Mayer says, all of your money is in the same pot and belongs to both people. A couple just has to decide how they will manage it.

How to merge finances long after marriage

Track spending habits and consider making a budget. For some, the act of tracking income and expenses can bring up uncomfortable feelings.

“If someone hasn’t been tracking their spending, they might not want to know where their money is going,” Mayer says. “But that information is data, and knowledge is power. If you want to change things, you have to be able to make informed decisions with that data.”

Once you have details about your income versus expenses, you and your partner can decide how much you want to spend on groceries, dining out, clothes and more. You also might make bigger decisions, such as moving into a home with lower rent or buying a car with a monthly payment that you can more easily afford.

Discuss how you’ll split shared expenses. Couples rarely have equal incomes, but when you’re married, your household expenses become a shared responsibility. To avoid resentment, couples should discuss an equitable arrangement for how expenses will be paid and who is responsible for which financial tasks in the household. For example, if one partner makes twice as much money as the other, perhaps they’ll contribute double to household expenses.

Open a joint account or add your partner to an existing account. If you don’t have a shared checking or savings account, you can shop around for a new account or see if your bank will allow you to add a co-owner to an existing account. Keep in mind that co-owners each have full ownership of the account and can withdraw as much money as they see fit. You may want to set spending limits with each other so you’ll both be informed about big purchases and avoid potential overdrafts. For a shared savings account, you’ll want to look for a high-yield account that helps you earn as much interest as possible on your money.

As you navigate the world of shared finances, remember that a strong financial partnership starts with a commitment to honest communication, teamwork and shared goals. These values can help you maintain a solid foundation in your marriage, too.

Chanelle Bessette writes for NerdWallet. Email: cbessette@nerdwallet.com.

The article Merging Finances Long After Marriage? Here’s How to Start originally appeared on NerdWallet.

After starting a career in engineering in Boynton Beach, Florida, Moisey Abdurakhmanov was renting a home with friends when he decided he wanted his own place.

“I realized I was basically paying somebody else’s mortgage every month,” he recalls.

So when the lease was up, he moved back home with his parents, saved every dime he could and bought a house five months later in January 2021 — “easily one of the best decisions I’ve made.”

Many millennials are taking a similar path to homeownership. About a quarter (24%) of people ages 25 to 33 who bought a home between July 2022 and June 2023 said they moved in directly from a family member’s home, according to a National Association of Realtors’ survey. Last year 29% of people who planned to buy a home in the next 12 months had already moved in with their parents to save money, and another 22% said they’d consider doing so, according to a May 2023 survey by Realtor.com and Censuswide.

With high housing prices and rising mortgage rates, you might think saving for a house will take ages. Moving in with parents can speed up the process and eliminate the headache of synchronizing a home purchase with the end of a rental lease.

But the strategy comes with challenges, no matter how much you like your folks. Here’s how to make it work.

Clarify your savings goals

Before broaching the idea, research the market where you plan to buy, figure out how much home you can afford and set a savings goal.

The two biggest upfront expenses are the down payment and closing costs. Minimum down payment requirements vary by mortgage type. Some conventional loans have minimum down payments as low as 3%, but the more you put down, the less your monthly payments will be. Closing costs range from about 2% to 6% of the loan amount.

Consider taking a first-time home buyer’s class to learn about the process, and consult with a lender or two. When you’re ready to shop for a home, you’ll want to get preapproved for a mortgage. When you’re still months away from house hunting, apply for pre-qualification — a less intense process — to see how much you may be able to borrow and what your monthly payments might be.

Then set a time frame. How long will it take to reach your goal if you move back home?

Discuss expectations — yours and your parents’

Have a conversation with your parents about your goals and time frame. Express your expectations about moving in, and ask them about theirs.

“We can avoid distress by recognizing our own expectations first and then communicating clearly with each other about what we’re hoping for … A red flag for me would be if the parent says yes without any conversation about expectations. That would set up a recipe for ill feelings on the back side,” says Saundra Davis, founder of Sage Financial Solutions, a nonprofit financial education and planning agency in the San Francisco Bay Area.

Give space for discussing pros and cons and how you’ll navigate the challenges, including the emotional ones. Understand that there may be mixed feelings about the new living arrangement. “Very few people feel 100% bad about something or 100% good about something,” says Ed Coambs, a certified financial therapist, fee-only certified financial planner and author of “The Healthy Love & Money Way: How the Four Attachment Styles Impact Your Financial Well-Being.”

Some parents and adult children may feel a stigma about moving back home, but don’t let societal pressures subconsciously drive your decisions.

“I think that the United States as a culture has normalized what we call ‘launching.’ If you look at other cultures and in the Black community, it is not abnormal for our kids to stay home longer,” says Davis, who is also a mindfulness teacher and master certified coach. The “failure to launch” concept can put extra pressure on parents and young adults. “If there is shame, where does it come from? Do we believe it? And does it serve us?” Davis says.

Sort out those feelings and do what’s best for you and your family.

Agree on household responsibilities

“The question is, what does it look like for us as mature adults and family members to live in this space together?” Coambs says.

Will you chip in for household expenses? How much? Will you share groceries? Who will do the shopping? What about cooking and cleaning? Will you call home if you’re going to be out late?

All of these — and more — are up for discussion.

Abdurakhmanov, who moved back home in August 2020, says his folks agreed to let him stay rent-free and fully supported his plan to buy a house. But the transition was still an adjustment.

“When I went from having the freedom to do what I want, when I want, to being under the roof of my parents again, there was a lot of headbutting between how I wanted to live my life and what my parents wanted me to do,” he says. “It was a little rough.”

So they talked.

“I drew some boundaries and told them there were certain things that we would just not argue about anymore … We all agreed to shift our focus and look forward to the future.”

Meanwhile, Abdurakhmanov agreed to join his parents more frequently for family dinners and events. “They had missed spending time with me … They felt I was drifting away from them, and they didn’t like that, which is understandable. I can see where they were coming from.”

Schedule regular family check-ins

Keep communication lines open after you move in. Set a regular time to check in about how things are going.

What’s working well with the living arrangement? What could be handled better? Are you on track with meeting your saving goals? Do you need to adjust the timeline?

It doesn’t have to be a formal business meeting. In fact, these conversations might go better during a meal or a relaxed outing.

Listen and empathize

No matter how well you’ve planned and communicated, occasionally you’ll get on each other’s nerves. Listen and be curious.

“Often we get stuck in our own perspective or what we think is the other person’s perspective,” Coambs says. “When we can insert empathy into the relational dance, oftentimes it can loosen things up and open up new options.”

Then the potential payoff from moving back home is more than a home down payment.

“It can also represent a great opportunity to continue to grow and nurture your adult-to-adult relationship with your parents,” Coambs says.

Abdurakhmanov says living with his folks helped prepare him for his next chapter. “It was a good buffer period for me to reestablish myself and everything about me that I wanted to take forward moving into my own place.”

Barbara Marquand writes for NerdWallet. Email: bmarquand@nerdwallet.com. Twitter: @barbaramarquand.

The article Moving Back Home to Save for a House: How to Make It Work originally appeared on NerdWallet.

Getting upset at junk fees is like getting upset at the flu.

Sure, I’m annoyed both when I get sick and when I have to pay $20 for my seat of choice, but it’s pointless to get mad at the viruses or airlines responsible. They’re just doing their jobs: One maximizing self-replication, and the other, profit.

Since budget airlines rose to prominence over a decade ago, airlines have been exploiting a quirk in human purchasing psychology: We’re attracted to low initial prices and tend to overlook high total costs when fees are “dripped” out slowly.

Indeed, it’s been shown that consumers systematically make suboptimal decisions when prices are dripped throughout the checkout process rather than disclosed up front, according to a 2020 study in Harvard Business School’s journal Marketing Science.

Just as a virus will exploit a weakness in the human immune system to reproduce itself, airlines have quickly realized that offering the lowest base fare possible and the highest fees is a great way to increase profit.

A 2023 report from IdeaWorksCompany, an airline industry reporting firm, and CarTrawler, a travel software provider, notes that ancillary revenue (i.e., fees) as a percentage of total revenue more than doubled from 6.7% in 2014 to 14.7% in 2023.

Junk fees exist because they work, and they won’t go away until they stop working.

Recent federal intervention

In April, the U.S. Department of Transportation (DOT) rolled out new consumer protections for air passengers, including rules aimed at stymying junk fees.

Over the next two years, airlines and travel booking platforms must start displaying the cost of baggage and cancellation fees “clearly, conspicuously and accurately.” They must also do away with some funny business, like making seat selection fees appear mandatory when they aren’t — one of my biggest pet peeves.

It’s a step in the right direction and hopefully will save passengers the time and money they would have spent getting flummoxed by these fees. Yet just as viruses mutate, it’s possible that airlines will find workarounds and new fees faster than federal regulators can quash them.

Indeed, airlines are already suing the DOT over its new fee transparency rules, calling them “arbitrary, capricious, an abuse of discretion and otherwise contrary to law,” according to a report from Reuters. So who knows if they’ll ever go into effect.

We need better search tools

In preparation for its new regulations, the DOT held a public hearing to get feedback from affected groups, including the travel booking platforms, earlier this month. One name that jumps out in the summary of these hearings — some 38 times by my count — is “Google.”

Some excerpts from the report:

• “Google expressed its view that the Department did not explain how consumers were harmed by not having fee disclosures until the ticket purchase stage of the booking process and that consumers are aware of fees.”
• “Some … metasearch entities such as Google stated that the existing marketplace provided transparency and that the rule would diminish consumer choice and competition.”

Basically, Google tried to convince the DOT that the current model, in which search engines like Google Flights display base prices without junk fees, is good enough.

Huh?

Sure, airlines have a vested interest in maintaining the status quo, since it’s making them boatloads of money. But why does Google care? Besides the technical hassle of updating its software to reflect the DOT’s regulations, Google Flights should applaud anything that helps consumers find the lowest-cost airfare.

If Google isn’t going to do it (and it sounds like they won’t), a travel search tool needs to step up and help travelers make sense of add-on fees.

The DOT’s rules are like nutritional information on food: They’re a good first step to helping consumers make better choices. Now, we need the travel shopping equivalent of Whole Foods to actually offer the product that price-conscious travelers are craving.

It’s not complicated. We just want to know how much a flight or hotel room will actually cost. If services like Google won’t figure it out, somebody else (hopefully) will.

Herd junk fee immunity

Halting the junk fee pandemic could also require another change: fed-up consumers.

Although airlines have been racing to the bottom in terms of adding fees, they still differ significantly. According to our recent analysis at NerdWallet, the airlines with the lowest fees are:

• Southwest Airlines.
• Alaska Airlines.
• Hawaiian Airlines.

And the airlines with the highest fees are:

• Frontier Airlines.
• Spirit Airlines.
• United Airlines.

When searching for flights, I usually omit the big offenders altogether, either by filtering them in search results or ignoring their fares.

Do they sometimes offer the best flights at the best prices? Probably. But it’s not worth my time and effort to go through their laborious drip-filled checkout processes to figure out how much I’ll actually pay.

This is a kind of “acquired immunity” to the junk fee virus. I’ve been exposed to these fees often enough (it’s basically my job) that I can either avoid or ignore them.

However, many travelers aren’t on the front lines of junk fee exposure and search for flights only once or twice a year.

It could take years before we reach herd immunity, where the spread of the problem is blocked because enough people are immune. Yet I’m confident that, with a little help from the federal government and innovation from the private sector, we’ll turn the junk fee pandemic into a not-so-fond memory.

Sam Kemmis writes for NerdWallet. Email: skemmis@nerdwallet.com. Twitter: @samsambutdif.

The article Travel Junk Fees Are a Virus With No Easy Fix originally appeared on NerdWallet.