Chicago Security Deposit Interest Requirements Explained
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Quick Answer
- Chicago landlords are required to pay interest on security deposits held for more than six months.
- The interest rate is set annually by the city — it's not up to the landlord to decide.
- Failing to pay interest correctly is its own RLTO violation. Dweller IQ can tell you exactly what the current requirements are and how they apply to your situation.
Holding the Money Isn't Enough
Most landlords know they need to collect a security deposit. Far fewer know that under Chicago's RLTO, holding that deposit comes with an ongoing obligation: you have to pay interest on it.
This isn't a technicality or a fringe rule. It's been part of the RLTO for decades. Landlords who discover it for the first time after a tenant files a claim have had a very expensive education.
"You're not just holding a tenant's money. You're borrowing it. And Chicago requires you to pay them for the privilege."
The Rate Is Set by the City
The interest rate on Chicago security deposits isn't a number you negotiate or look up once and apply forever. The city sets it annually, and it changes. Applying last year's rate to this year's obligation is a mistake that has cost landlords their right to make deductions.
The specific rate applies to deposits held over a certain minimum period. Below that threshold, the requirement doesn't apply — but that window is shorter than most landlords assume.
How and When You Pay It
Interest has to be paid (or credited) on a specific schedule. It's not something you settle up when the tenant moves out and call it even. The ordinance has timing requirements that run throughout the tenancy, not just at the end of it.
Getting the rate right but the timing wrong is still a violation. And like most RLTO violations, the consequence isn't just "fix it." It can affect your ability to make deductions when the tenancy ends.
The Chicago Security Deposit Laws guide for landlords covers how the interest requirement fits into the broader compliance picture — and Dweller IQ can help you get the current rate and apply it correctly before it becomes a problem.
Key Takeaways
- Chicago landlords must pay interest on security deposits held longer than six months
- The interest rate is set by the city each year — it's not static and not optional
- Interest must be paid or credited on a schedule, not just at move-out
- Using the wrong rate or wrong timing is an independent RLTO violation
- An interest violation can jeopardize a landlord's right to make deposit deductions later
