|Glossary of debt and savings terms
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42. Tax-free money market mutual fund -- A mutual fund that invests in short-term debt instruments issued by tax-exempt entities at the federal level, and sometimes at the state and local levels. Earnings are not taxed on a federal level, although they may be subject to tax at a state and local level.
43. TIPS, or Treasury Inflation-Protected Securities -- Inflation-adjusted bonds issued by the U.S. Treasury. The principal is periodically adjusted for inflation, and the semi-annual fixed interest is paid on the adjusted principal. People who hold TIPS pay tax annually on the interest payment. One drawback of TIPS is that the holder pays taxes annually on the adjustment to the principal even though the adjustment is not received until the holder cashes the bond.
44. Traditional IRA -- The original self-directed retirement plan, a traditional IRA allows individuals to contribute money annually based on how much they've earned, such as wages, or up to IRS-established limits, some of which are related to age. Contributions may be tax-deductible, partially deductible or non-deductible, depending on the investor's income and whether or not the individual is covered by a retirement plan at work. Taxes are deferred on traditional IRA earnings, meaning the holder does not have to pay taxes until the money is withdrawn from the account.
45. Treasury bill or Treasury note -- Debt issued by the federal government and sold as a security.
46. Two-cycle billing -- A billing method that calculates the average daily balance using two billing cycles rather than one. Finance charges are typically higher. This method eliminates the grace period for customers who carry a balance. If the bill is not paid in full at the first billing, interest becomes retroactive back to the purchase date.
47. Universal default -- A policy some lenders apply to credit card users who pay any creditor at least 30 days late. The clause allows the issuer of a credit card to change the interest rate charged to a card holder, even if the card holder's late payment was made to another creditor. In many cases, the new interest rate is dramatically higher than the previous rate.
48. Unsecured debt -- Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a major reason why the interest rate on credit cards is higher than rates associated with other forms of lending, such as mortgages (which use property as collateral).
49. Variable interest rate -- Percentage that a borrower pays for the use of money, and which fluctuates periodically based on changes in an interest rate index.