Sweep-In facility is a popular savings technique where your bank savings account amount is moved into a fixed deposit automatically. Many people use this method to earn higher returns on their FD component. The feature also allows you to have accessible funds, so that you do not face any fund crunch in time of need.
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With features like higher returns and flexibility, sweep-in FDs are very easy to open with a linked bank account. Here's how they work:
How Sweep-In FD Works
To access these features, banks usually require you to open a savings account and an FD account. When you opt for sweep-in FDs, the bank sets a pre-defined threshold for both savings and FD accounts. Subsequently, when the funds in your savings account exceed the threshold, they are moved in the FD account. Similarly, if the funds in the savings account are below a certain limit, the bank moves the FD amount directly into the savings account. This allows you to have more flexibility with your money.
Interest Credit In Sweep-In FDs
With flexibility, sweep-in FDs also provide you with the opportunity to earn higher returns on the FD component. Funds in the FD earn interest at the FD rate, while the savings account earn savings interest rate. This helps in maximising your earnings on idle funds.
What To Consider
Banks will ask you to agree to a pre-determined fixed tenure FD for this facility. For example: you opt for a sweep-in FD on your savings account with a threshold balance of Rs 25,000.
When the money crosses this threshold, the surplus will be automatically moved to a fixed-tenure FD. With an auto-sweep FD, there's no penalty fee for premature withdrawals. This allows you to have more flexibility over your money.
Even when a part of the FD is diverted to manage savings account balance, the remaining portion continues to earn FD interest.
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The key thing is that both FD and the savings account need to be with the same bank for this facility. So, you can check and compare the returns and features offered by different banks before making a decision.
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