It can be hard committing to lock up your money in a certificate of deposit, or CD, when the economy is rough and the household budget is perhaps a bit shaky. If CDs are to your liking, keep in mind that not all CDs penalize you for withdrawing money before the CD matures.

Admittedly, interest rates are awful, but short-term CDs still compare favorably to most of their more liquid brethren such as money market accounts, or MMAs, and money market funds, MMFs.

The average yield on MMAs, according to Bankrate surveys, is 0.32 percent. The Crane 100 Money Fund Index, published by Crane Data, pegs the average seven-day yield for the 100 largest taxable MMFs at an abysmal 0.09 percent.

Yields on standard CDs are averaging 0.4 percent for three months, 0.58 percent for six months and 0.92 percent for 12 months.

Not so carefree after all

So-called no-penalty, or risk-free, CDs too often aren’t quite as carefree as their names imply. You can withdraw funds before the CD matures without penalty, but some banks pay a lower interest rate than what they’d offer on a standard CD of the same maturity. Fortunately, that’s not always the case.

Discover Bank has a 12-month, no-penalty CD with an annual percentage yield, or APY, of 2 percent, the same as it ordinarily pays on a 12-month CD in this environment. There’s a minimum deposit requirement of $2,500 and the offer expires Dec. 31, 2009.

The hitch on the Discover offer is that you can only withdraw your money without penalty if you are laid off involuntarily. You must be employed full-time and remain employed for 30 days after opening the account. Discover Bank’s standard penalty for early withdrawal on CDs with one- to five-year maturities is six months’ simple interest.

Steve Olszewski, vice president of deposit products at Discover Bank, says the CD has been attracting consumers.

“What we learned from interaction with our customers is that a lot of people were putting their money into shorter-term savings accounts just because they felt like they were going to need ready access to it. In essence, they were losing the potential for higher earnings from a CD product so we came out with this promotion.

“We tried to make it a bit unique in that we did it on our 12-month product, which is one of the most popular terms out there. The other thing is it’s not just for new customers, it’s any account that’s opened whether it’s new or a renewal.”

The desire for flexibility

Ally Bank’s no-penalty CD is a bit more typical in that you can access the money at any time for any reason. It’s a nine-month CD with an APY of 1.65 percent. There is no minimum opening deposit. Other than the fact that it has a fixed rate, it’s hard to tell it apart from Ally’s high-yield savings account and money market accounts, which have variable yields of 1.7 percent and 1.65 percent, respectively.

“People value having the flexibility and the competitive rate,” says Ally Bank spokesman Travis Parman.

Bank of America’s nine-month, risk-free CD has an APY of 0.65 percent and a hefty $5,000 minimum deposit. Nevertheless, it beats the 0.5 percent return the bank pays on standard CDs with maturities of six to 11 months. The bank reserves the right to require seven days’ written notice of your intent to withdraw money. If you can forgo the risk-free withdrawals feature — and can tie up the money a bit longer — BofA has a much more enticing 12-month CD with a yield of 1.4 percent. Again, the minimum deposit is $5,000. Both CDs are available only online.

SunTrust is another option, with a 10-month, no-penalty CD that pays 0.7 percent when funded with at least $2,000. The call center representative says that in many states you must have a SunTrust checking account to qualify for the promotional CD.

If liquidity is important, and you can tolerate a potentially fluctuating yield, consider high-yield savings and money market accounts. Some institutions, especially many online banks, reside in the high-yield world pretty much on a continuous basis and can be counted on for having yields that are well above average.

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