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Interest Rate Sound Too Good to Be True? It May Be

Compare the offer against the averages, and find out the catch.

Perhaps it's lady luck.

Fifth Street Bank

(FSB) - Get Free Report

of Las Vegas is offering a 5% rate on a savings account with a minimum balance of $100.

This rate is almost double the next-best Nevada rate listed on and better than Fifth Street Bank's rates on CDs and IRA accounts of any length, both of which have much higher minimum balances and offer less flexibility.

In fact, to get a rate this good on one of Fifth Street Bank's money-market accounts, you'd need to invest at least $20,000. And, like the savings account, the money-market account is variable rate -- you haven't locked anything in.

Rates like this -- out of line with the rest of the market -- aren't altogether uncommon finds on the Internet. And they beg the question "What's the catch?" What's buried in the ever present "check with institution for further terms and conditions" warning?

Fifth Street Bank didn't return repeated calls to answer how it could provide such a high savings-account rate.

Maybe it's just a terrific rate.

But the answer may lie in the accounts variable rate - Fifth Street Bank's Web site doesn't say what benchmark, if any, it uses to make adjustments. So the rate may hardly be guaranteed for much longer than it takes you to deposit your money.

The seemingly too-good-to-be-true doesn't end in Sin City. An Internet ad for

MLN bank

asks readers why they'd "settle for less than 8%" on CDs and IRAs.

Turns out, there are a number of good reasons. MLN is an offshore bank, so account holders don't have federal deposit insurance.

So part of the advertised 8% is a "there's no guarantee that you won't lose all your money" premium. And premium CDs don't allow early withdrawals.

So anyone in a financial fix would have no access to the money. And if the bank looks like it's going to tank, account holders would have little choice but to watch their money go down with it.

And to get an 8% rate, account holders would need to leave a lot of money vulnerable: $100,000 for four years or $25,000 for five. And don't be fooled into thinking the effective rate is higher because it's offshore: in the U.S., worldwide income is reportable to Uncle Sam, there's small chance anyone's going to be legally escaping taxes.

But if the old adage "if it looks too good to be true it probably is" holds, then what's "too good"? There are, of course, good deals out there, but when they're way out of line with market averages, you might want to give the fine print a second look.

Wondering what market averages are? Here are an assortment of average rates from As always, check with the institution for further terms and conditions.

Check out your

best local rates.