By Sabrina Karl

When putting your cash into a bank or credit union, there are more choices than plain vanilla savings accounts and conventional certificates of deposit. One hybrid product to consider is a no-penalty CD as it balances the quest for maximum returns with the desire for easy access to your funds should you need them.

No-penalty CDs, sometimes called no-risk or risk-free CDs, are exactly what they sound like. Instead of the early withdrawal fees that traditional certificates charge if you cash in before maturity, you can take all or some of your funds out of a no-penalty CD at any time with no loss of interest or principal.

The one exception is that most no-penalty CDs will require you to lock your funds in for about a week. Then the no-penalty period will kick in.

The trade-off, as you might predict, is you’ll typically earn a lower interest rate for no-penalty certificates than you could earn by fully committing your funds to a traditional term. The difference varies widely by institution, but can be significant.

On the flip side, you can usually earn more with a no-penalty CD than with a simple savings account. That’s what makes the risk-free CDs a hybrid: they typically sit between the earnings potential of savings accounts and standard certificates, while also offering a withdrawal flexibility that lies between the two.

Since most no-penalty certificates have terms around 12 months, they make good sense for savers who want to sock some money away but aren’t certain they can leave it untouched for a year. If instead you want frequent withdrawals of your funds, a high-yield savings account will suit you better, while those with high confidence they can hold their funds in place for a year or longer will earn more with a conventional CD.

By Sabrina Karl

Imagine a checking account with all the standard transactions you’d expect from a checking account, but paying 2, 3 or even 5 percent interest on your balance. Since most checking accounts pay no interest at all, and even the top-paying savings accounts in the country offer less than 1.5 percent, you’d be smart to ask, “What’s the catch?”

These accounts are typically called “high-interest checking accounts”, and though they have a number of strings attached, they aren’t a scam. They’re legitimate accounts, usually offered by smaller banks and credit unions, that simply have very specific requirements for earning the off-the-charts interest rate they advertise.

The most common hoop you’re required to jump through is using your debit card a minimum number of times each month, and we’re not talking about three or four transactions. A typical requirement is 12 debit transactions per statement cycle, and I’ve even seen an account requiring 20. The purchases will also have to be signature, not PIN-based, transactions.

Other typical stipulations include paying at least some number of bills online each statement cycle, setting up direct deposit, and at some banks, opening a credit card with that institution. Signing up for electronic statements is almost always required.

One caution is to check the account’s balance cap. Most high-interest checking accounts specify a maximum balance that can earn the high rate, with anything above that threshold earning zero or near-zero interest. Sometimes the balance cap is an accommodating $10,000 or $20,000. But accounts with caps of just $1,000 or $2,000 won’t be worth your trouble.

If frequently using your debit card is easy for you, a high-interest checking account could significantly boost the interest you earn from your regular banking. Just be warned that the bank will only pay that chart-topping rate in months where you meet every requirement.