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.