NEW YORK -- When interest rates are this stingy, making your money grow requires a little extra work.
It's why checking accounts that promise competitive interest rates are getting so much attention lately. The rates dangled by some banks for these accounts are more than triple the current 0.67 percent average rate on a one-year certificate of deposit, according to Bankrate.com
Yet high-interest checking accounts are often laden with stipulations in the fine print, and can even end up costing those who aren't careful. And for large sums of money, it often makes more sense to park your money in a savings account that earns a higher interest rate.
Before you jump at any offers, a few points to consider.
The first thing you should know is that interest rates on checking and savings accounts aren't locked in. Unlike with CDs, banks can change rates at any time.
So if an advertised rate catches your eye, don't bother crunching numbers on how much interest income you might reap over a few years.
The rate adjustments banks continually make aren't tied to any particular benchmark either. Instead, banks say they tweak rates based on their internal financial situations.
Additionally, if an advertised rate sound too good to be true, it might be because it's an introductory, promotional rate.
At Everbank, which offers interest-bearing checking accounts, a guaranteed 2.25 percent rate only lasts for three months. After that, the rate drops depending on the balance. Balances less than $10,000 currently earn 0.51 percent interest.
There's also reason to believe banks may lower rates on checking accounts in the near future, said Bob Davis, a spokesman with the American Bankers Association.
That's because banks primarily fund their interest payments on checking accounts from the fees they collect from businesses for debit card transactions. However, new financial regulations will eventually limit those fees. So banks can't be as flexible with the rates they offer, Davis said.
"This is money customers can demand at any time," he noted.
The interest rates banks advertise don't always apply across the board. Banks often tier rates so that only customers who maintain the biggest balances earn the highest rates.
To earn the most competitive 0.25 percent rate on a checking account at Bank of America, for example, you need to maintain a $100,000 balance.
That amounts to $250 a year. But the rate drops to just 0.05 percent for balances less than $10,000.
Also keep in mind that an advertised rate may only apply to a capped amount. This tends to be the case with credit unions, which are nonprofits owned by their members.
At the Northern Federal Credit Union in upstate New York, members can earn 4.51 percent interest on their checking accounts. But that's only on balances up to $25,000. The rate drops to 1.5 percent for balances higher than $25,000 but below $50,000. Beyond that, the rate falls to 0.5 percent.
There are other conditions with the checking account, including that members set up a recurring direct deposit and make at least 15 debit card transactions of at least $5 each month.
Credit unions generally tend to offer more generous rates. But they also limit membership to a particular region, profession, university or other group. In the case of the Northern Federal Credit Union, it's generally those who live or work in the three-county area surrounding Watertown, N.Y.
Read the terms carefully to see if there are any fees associated with the account.
At Bank of America, customers who don't maintain a $10,000 balance across all their accounts incur a $25 monthly fee. So an interest-checking account wouldn't be worthwhile if you maintained an $8,000 balance.
Over a year, you'd earn $4 in interest but pay $300 in maintenance fees.
Overdraft charges can eat away at your earnings. This shouldn't be an issue if you're maintaining a relatively large balance to earn a higher rate.
At Schwab, however, there's no balance requirement to earn the current 0.50 interest rate on checking accounts. But if you overdraw your account, the needed funding is borrowed from a brokerage account that's automatically set up for you when you open a checking account.
The overdrawn balance incurs an interest rate that's tiered depending on the amount of the violation. If you overdrew your account by $20, the rate is 8.5 percent.
The bottom line? You don't want to change banks based on interest rates alone. Especially because rates aren't locked in, other considerations such as service and convenience should be factored in.