Businesses and individuals alike look for methods to improve their cash flows in the area of financial management to make sure that every penny is put to good use. The idea of ‘Sweep’ in Fixed Deposits (FDs) is one such facility that is becoming popular. This strategy allows the transfer of money from one account to another, increasing the profits. In this article, we will delve into the benefits of sweep in FD and its parameters.
Fixed deposit sweep is a provision designed by financial institutions using which you can transfer more than the stipulated amount of money from a savings or current account to a fixed deposit account. It helps you increase your profits. It is essential to know that sweep in FD also helps you to maintain the fluidity of savings accounts. With money being transferred to the FD, interest accrues over time, leading to a boost in the overall return on investments. The auto sweep FD tenure offered by most banks is one year. It can also vary and may go up to five years.
People do not have the time to check the amount of money in their banks regularly. The auto sweep FD feature helps them to keep a check on their funds. It automatically transfers the excess funds from your current account to your FD sweep-in account. It helps to grow the interest rate which leads to a rise in the returns.
There are some prerequisites that you need to keep in check before you open a sweep-in account. These requirements ensure that the process is smooth, without any hindrance, and aligns with your financial goals. The prerequisites are listed below.
It is essential for the savings or the current account and the FD sweep account to be linked. Also, all banks prefer to have both accounts in the same financial institution for automatic transfers.
You need to keep in check the minimum balance required for both accounts. Usually, most financial institutions transfer the funds in your Sweep-in FD account in the multiples of Rs. 1,000, but some banks allow you to transfer money starting from Rs. 1 to Rs. 1,000.
Usually, the interest rate of a sweep-in FD account is similar to any normal FD account and will be based on the terms of the FD.
An investor who has invested a minimum amount of Rs. 25,000 in the FD is eligible for the sweep-in account, and not all investors are allowed. You can also choose this facility if you hold a premium account and a minimum amount of Rs. 25,000.
The money invested in the FD via the sweep-in facility can be taken out without breaking the whole FD.
The investors can apply for a Sweep in FD account via both online and offline modes. They can use the online facility by visiting the bank’s website or through net banking. They can also visit the nearest bank to avail of this facility offline. Whether online or offline, you have to follow some steps mentioned below:
- In the first step, you must link the savings or current account to the FD account.
- Set the limit of your bank account according to your requirements. The amount more than the set amount will be transferred automatically by the bank.
- Finally, activate the auto sweep-in FD. The investors have to select the fixed tenure options provided by the bank. The auto sweep-in facility will only be available after the investors have selected their tenure.
As we have discovered about FD Sweep, let’s now have a look at its advantages.
- Higher Rate of Interest
You can enjoy a higher interest rate from your FD by choosing this option. The returns with a sweep-in facility are higher than those with your current account.
- Increased Liquidity
The sweep-in provision gives you fluidity between your bank accounts. You can transfer funds easily from your bank account to your FD account.
- Helpful to Pay-off Debts
Rather than putting money into an interest-earning account, you can transfer it to sweep-in accounts. These funds can be used to pay off huge loans.
Sweep-in accounts offer flexibility to all investors to choose their tenure, period of deposit and payment according to their convenience.
There are some limitations that you need to keep in mind while availing auto sweep-in FD facility.
- Some banks set a limit on the number of accounts that can be opened.
- You might have to pay extra fees if you avail the auto sweep-in facility.
- Penalties may be charged for withdrawing money in an auto sweep-in FD, so it is advisable not to take out funds from an auto sweep-in account.
Sweep-in FD facility helps you increase your returns and funds. It is a provision that helps you maintain the liquidity in your accounts, making them flexible. You can also make some necessary withdrawals from your account without any payment or extra charge. Investors can maximise their cash and maintain accessibility. Sweep-in FDs are an attractive alternative for those looking to make the most of their financial resources since this provision accompanies ease, flexibility and good returns. So it is better to choose the sweep-in FD facility than keeping your funds idle in your savings or current account.