It's a topsy-turvy world when checking accounts are the most lucrative investment around.

Yet that's what's happening.

Hundreds of community banks across the country are paying 4% APY or better on high-yield checking accounts at a time when savings accounts, money market accounts and certificates of deposit are paying half that much.

Some banks limit these accounts to local customers. Others accept new accounts from anywhere in the country, but those numbers are dwindling.

Many banks saw this as a great opportunity to lure depositors and plump up their balance sheets. But the popularity of these high-yield accounts forced many to either slash interest rates or limit applications to area or state residents.

Although fewer and fewer banks offer high-yield checking accounts nationwide, there isn't a state that does not have banks and/or credit unions that offer higher rates to residents than you can get on any deposit, with the possible exception of a long-term CD.

The fact that the nearest branch might be hundreds of miles away is no big deal because of the other primo benefit these accounts offer -- you can use any ATM for free.

Each month you're reimbursed for the ATM fees you incur, usually up to a limit of $20 or $25. But that allows you to tap the most convenient ATMs for cash eight to 10 times a month.

The most generous of these accounts have no limit. Go every day if you want.

So, the best interest rate around and the ability to use any ATM you want for free -- there must be a catch, right?

There is.

These accounts have more rules than regular checking accounts. The most common:

• You must make a minimum number of debit card purchases each month, usually 10 or 12. And they have to be the kind of transactions where you enter a personal identification number, not sign for purchases like a credit card.
• You have to receive all of your statements electronically. Some banks actually require you to log into your account once a month.
• You must make at least one direct deposit or regularly scheduled electronic withdrawal -- to pay your gym membership, for example -- each month.
• The interest rates are adjustable, and as for the rates on all types of deposits, the return on many of these accounts has been coming down. For example, many accounts that were paying 6% last summer are paying 5% now.
• There is a cap on how much money can earn the highest interest rate. The first $10,000 to $50,000 in the account usually qualifies. Balances over that earn a much lower interest rate, sometimes as little as 1.01% APY.

If you don't follow the rules, banks can't make enough money on these accounts to pay such high interest rates.

The mandatory debit card purchases generate extra revenue. Supermarkets, gas stations and other stores pay the bank a transaction fee every time you swipe your debit card and enter a PIN.

But there's a limit to how much profit the banks can make with this clever scheme, which is why there's a limit on how much money can earn the super-high rate.

It's also why there are severe penalties if you fail to abide by any of these rules.

Mess up, and your interest rate for that month plunges to something like 0.30% and your ATM fees aren't reimbursed.

So, is a rewards account right for you? It might be, if:

• You already use a debit card regularly. It's not hard to use a debit card 10 times a month -- breaking it out for groceries and gas will probably do it. But if you're not in the habit, it does require a new way of thinking.
• You're organized. You need to remember to meet all of the bank's requirements every month, so it helps if you're good at keeping your ducks in a row. The author of My Money Blog puts the sticky part of a Post-it note on the back of his debit card with 10 little boxes he checks off. (A piece of masking tape would work, too.)
• You're comfortable with Internet banking and have the patience to work with small banks that don't always have the most up-to-date software. If you still value paper statements, this probably isn't for you.
• You have enough money to make the effort worthwhile. If you're moving $5,000 to an account paying 5% from one paying 1%, you'll earn an extra $200 a year. If you have to go out of your way to meet the requirements, it may not be worth the effort. But if you're moving $20,000, the difference is much greater -- closer to $800 a year. And that might be worth any effort.

Still interested? Great.

Start shopping around. You want an account that offers a good rate and a high cap on how much money can earn that rate.

Take a pass on accounts that want you to make more than 15 debit card purchases a month, but give extra credit to those that will reimburse you for an unlimited number of ATM transactions.

Bankaholic.com is a great place to start. It's always watching out for the best deals.

Some of its recent favorites, which accept new applications from all 50 states, include:

Bank of the Sierra, headquartered in Porterville, with 22 branches in central California, is paying 4.51% on rewards checking accounts with balances up to $25,000. It accepts new accounts from all 50 states.

Ouachita Independent Bank, with 11 offices in northern Louisiana. It's paying 4.01% on balances up to $25,000.

Patriot Bank, which is paying 4.01% on balances up to $50,000. Based in Trinity, Fla., it has five locations just north of St. Petersburg.

CheckingFinder.com and High Yield Checking Deals are also good places to look.

By Mary Yanni

Interest.com Contributing Editor