Interferometry with ultracold atoms promises the possibility of ultraprecise and ultrasensitive measurements in many fields of physics, and is the basis of our most precise atomic clocks. Key to a high sensitivity is the possibility to achieve long measurement times and precise readout. Ultra cold atoms can be precisely manipulated at the quantum level, held for very long times in traps, and would therefore be an ideal setting for interferometry. In this paper we discuss how the non-linearities from atom-atom interactions on one hand allow to efficiently produce squeezed states for enhanced readout, but on the other hand result in phase diffusion which limits the phase accumulation time. We find that low dimensional geometries are favorable, with two-dimensional (2D) settings giving the smallest contribution of phase diffusion caused by atom-atom interactions. Even for time sequences generated by optimal control the achievable minimal detectable interaction energy $Delta E^{rm min}$ is on the order of 0.001 times the chemical potential of the BEC in the trap. From there we have to conclude that for more precise measurements with atom interferometers more sophisticated strategies, or turning off the interaction induced dephasing during the phase accumulation stage, will be necessary.
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