Personal Finance Glossary C to E: Plain-English Definitions

About this page

Finance is full of terms that sound simple until you have to use them. This page is a plain-English glossary for Personal Finance, covering entries such as Capital-Gain Distribution, Capital Gains Tax, Capital Loss Carryforward, Capitalized Cost, Carryover Basis, each with a short definition and a pointer to the part of the volume where it is explained.

Keep it open while you read, or use it to settle an argument about what a term really means. Every entry is written to stand on its own, with no jargon left undefined, and the part number beside it tells you where to read more. Use it as a quick reference whenever a term trips you up.

A sample of the entries (82 terms on the full page)

Capital-Gain Distribution — A fund’s payout of gains it realized by selling holdings, taxable to shareholders even if reinvested. Funds must distribute nearly all such gains each year to avoid a 4% excise tax (26 U.S.C. §4982). (Part 7.6)

Capitalized Cost — In a car lease, the negotiated price of the vehicle (negotiable like any price); the monthly depreciation charge is (capitalized cost − residual value) ÷ months. (Part 3.9)

Cash-Out Refinance — A new, larger first mortgage that pays off the old one and hands the difference to the borrower in cash, re-pricing the whole balance at the new rate. (Part 5.7)

CD — Certificate of Deposit — A bank or credit-union deposit at a fixed rate for a fixed term, with a penalty for early withdrawal; insured like any other deposit. (Part 2.7)

Chapter 7 Bankruptcy — Liquidation: a trustee sells non-exempt property and most unsecured debt is discharged within months; filers above their state’s median income must pass a means test. Court fees $338. (Part 3.8)

ChexSystems — A consumer reporting agency banks use to screen applicants for deposit accounts. Its freeze is separate from the three credit bureaus’. (Part 13.3)

CLUE Report — An insurance-industry database (Comprehensive Loss Underwriting Exchange) holding seven years of claims history on people and properties, which insurers use to price and accept policies. (Part 8.5)

Combined Loan-to-Value (CLTV) — All loans secured by a home divided by its value. Home equity lenders often cap it at 80%, sometimes 85%–90%. (Part 5.7)

Compound Interest — Interest earned on both the original principal and previously accumulated interest — the mechanism behind every long-horizon growth figure in this volume: FV = P × (1 + r)^n. (Part 7.1)

Cramdown — In Chapter 13 bankruptcy, reducing a secured claim to the collateral’s value. Purchase-money loans on personal cars incurred within 910 days before filing cannot be crammed down. (Part 3.9)

Credit Freeze — A free block on new creditors accessing a credit report, placed separately at Equifax, Experian and TransUnion and lasting until you lift it; prevents new-account identity theft, doesn’t affect a credit score, and is stronger than a fraud alert. (Part 13.3)

Credit-Shelter (Bypass) Trust — A trust funded at the first spouse’s death with up to that spouse’s estate-tax exclusion; portability now achieves much the same federally. (Part 12.3)

Custodial Roth IRA — A Roth IRA an adult manages for a minor with earned income until the age of majority; 2026 contributions up to $7,500 or the teen’s earnings, if less. (Part 1.7)

Debt Account Aversion — The tendency, found in experiments, to pay off small debts first even when larger debts carry higher rates. (Part 3.5)

Debt Management Plan (DMP) — A plan run by a nonprofit credit counselor: you make one monthly deposit, the agency pays your unsecured creditors, and they often lower rates or waive fees; typically 48 months or more, with enrolled cards usually closed. It is not debt settlement, in which a for-profit company asks you to stop paying while it negotiates — damaging credit, inviting lawsuits, and possibly creating taxable forgiven debt. (Part 3.8)

Debt Validation — The information a debt collector must give in its first contact or within five days of it — creditor, amount, how to dispute; a written dispute within the 30-day validation period pauses collection until the debt is verified. (Part 3.8)

Default Judgment — A court judgment entered because the defendant did not respond to a lawsuit; it permits garnishment. (Part 3.8)

Defined-Benefit Pension — An employer plan that promises a set lifetime income, usually years of service × accrual rate × final average salary, with the employer bearing the investment risk. (Part 10.4)

Deposit Insurance Fund (DIF) — The FDIC fund, financed by bank assessments and interest on Treasury securities, that pays insured depositors when a bank fails; $161.1 billion, or 1.48% of insured deposits, on June 30, 2026. (Part 2.6)