It could cost landlords more to process a check and mail deposit interest to renters after July 1 than the amount due. Rates have plummeted to a near historic less-than-a-penny-per-dollar yield.

The new rates, determined by statutory formulas, change every year on Jan. 1. For 2009 the city rate is 0.12 percent for new and renewing rental agreements, according to Steve Lux, Chicago City Comptroller.

Rates run for the life of those agreements as determined by the start and end dates of a written lease, or until the rent adjusts on an oral lease. The state rate is 0.50 percent.

Prior year interest rates apply to agreements started in that year. For rental agreements started in 2008, the rates are 1.26 percent for Chicago renters and 0.35 for most other eligible Illinois tenants. To avoid confusion, it's recommended that the amount of the deposit and the current rate be written on the lease and the receipt for the deposit.

The City of Chicago's Web site (www.cityofchicago.org), has examples of how to calculate what is owed. See the Department of Housing/Community Services page. Look under Renters and Landlords/Security Deposit Interest Rates/Sample Security Deposit Interest Rate Calculations.

Landlords are required to place deposits in separate, interest-bearing FDIC-insured accounts in any Illinois bank they choose. Interest is calculated on all deposits, refundable fees and rents paid in advance when any of these are held for six months or more. Interest is owed to all Chicago renters, except those living in owner-occupied buildings with six or fewer units.

For most non-city renters, Illinois requires interest to be paid when living in buildings or complexes of 25 or more units when owned or managed by the same company.

Oak Park, Harvey, Mount Prospect, Evanston and Urbana have their own rules.

Interest is due every year within 30 days of the anniversary of a rental agreement, and at the end of the rental agreement along with the balance of the deposit itself. Payment is specified as cash or a credit to rent.

Failure to pay on time, or commingling of funds could result in a penalty up to double the deposit itself, plus lawyer fees if a tenant successfully sues. Several landlords have paid over $100,000 each in penalties and fees for scoffing at these laws.

The new Chicago interest formula is based on an average of three rates from the bank with the most Chicago branches. As of Jan. 1, JPMorgan Chase Bank (with 166 branches) paid 0.05 percent on minimum savings, 0.05 percent on money market accounts and 0.25 percent on 6-month CDs.

The state rate is pegged to the minimum savings account rate at the largest locally owned bank in the state based on assets. As of Jan. 1 at the Northern Trust Bank, the $500 minimum opening savings account rate was 0.50 percent.

Write mediator Ed Sacks at Apartment Watch, Homelife, Chicago Sun-Times, 350 N. Orleans, Chicago IL 60654, or e-mail apartmentwawtch@earthlink.net.