Extra Money

Another way to earn passive income from interest is to put your money into certificates of deposit or CDs as they are commonly called.  When you invest in a CD at your local bank they promise to pay a fixed interest rate for the term of the CD.  When the CD matures you will receive the promised interest.  For example if you have a $1000 CD for one year at the end of one year you will receive $1050.

The main drawback to investing in a CD rather than a savings account is that you don’t have access to your money during the term of the CD.  Actually, it is possible to access your money but you will usually pay a penalty of several months for doing so.  It is best not to put money into a CD unless you are fairly certain you won’t need it during the term of the CD.

Right now CDs are not paying much more than high-yield savings accounts at least for the short term.  Therefore, there is little advantage to investing in them for the short term.  Longer term CDs might be worth putting your money in if you believe interest rates will decline or remain level.  You can check out CD rates at Bankrate.com to get a better idea of what CDs are currently earning.

One of many great things about the Internet is how it has made high yield savings accounts widely available.  You no longer have to settle for the measly 0.5% interest that your local banks offer.  There are many online banks that will pay you 3% or more on your money.  Making them even better is the fact that most of the have low minimum balance requirement to open and maintain an account.  These accounts are FDIC insured so they are as safe as your local bank.

Probably the best known of these high yield savings accounts is ING Direct .   Their account currently pays 2.75% and you can open an account with as little as $1.  Even though ING pays much more interest than most local banks there are plenty of online savings accounts that pay even higher interest.  For example, FNBO Direct currently pays 3.25% and can also be opened with just $1.

Most interest bearing accounts are not paying very much these days.  You might be surprised to find that you can earn up to 6% interest from high-yield checking accounts.  To earn this high interest the accounts usually have qualifications similar to the following. You must have direct deposit or an ACH debit.  You must have  10 debit card purchases in a month.  You must receive your statements online.  You must access online banking.

These qualifications are all pretty easy to meet with the possible exception of the 10 debit card transactions.  My suggestion would be to make 10 small debit card purchases early in the month so you won’t have to worry about them later.

There are a couple of other features that are common with these accounts.  One is that there is usually a maximum balance of $25,000.  Another is that they offer ATM rebates.  If you don’t meet your qualifications in a month you will be paid a lower interest rate and won’t receive any ATM rebates.  These accounts are free from monthly service charges.

If you are interested in opening one of these accounts you can do so at CheckingFinder.com .  Another great resource for finding these accounts is HighYieldCheckingDeals.com.

I am classifying this as passive income although it does take a little work.  Most of the time when you are earning interest it is passive income though so I am going to classify this as passive income to keep things consistent.