19 March 2024 | By INDIE
Think of a sweep-in Fixed Deposit as an automatic savings booster! It is what links your savings account to a fixed deposit. Any extra cash in your savings (above a set amount) gets "swept" into the FD, earning you higher interest. Need the money back? No worries, it automatically sweeps back to your savings account whenever the balance is low, keeping your funds accessible while growing faster. It's like having the best of both worlds: easy access and higher returns!
While the basic concept of sweep-in fixed deposits (SWFD) sounds simple, the mechanics behind the scenes involve some interesting features. Let's understand the process:
- You link your Savings Account to a new or existing Fixed Deposit.
- You define a "minimum balance" you want to maintain in your Savings Account.
- Choose a sweep frequency (daily, weekly, etc.).
- The bank constantly monitors your Savings Account balance.
- When the balance exceeds your chosen minimum, the "excess" amount gets automatically transferred to your linked FD.
- This happens at your chosen frequency, ensuring regular additions to your FD.
- If your Savings Account balance falls below the minimum, funds automatically "sweep back" from your FD to maintain your desired buffer.
- This happens in a "Last-In-First-Out" order, meaning the most recently deposited amount gets withdrawn first.
Note: Some banks might have a minimum withdrawal limit for the sweep-back functionality.
- You earn the Fixed Deposit interest rate on the swept-in amount, boosting your overall returns compared to a regular Savings Account.
- Interest accrues daily in most cases, further maximizing your earnings.
- Remember, tax implications apply depending on your FD tenure and interest earned.
- Sweep-in amounts might vary depending on the bank's minimum transfer limit.
- Some banks might limit the total FD size created through sweeping.
- Carefully review the bank's terms and conditions for any specific charges or restrictions.
By understanding these mechanics, you can leverage sweep-in deposits to manage your finances effectively and optimise your savings. You can also enjoy the benefits of both, liquidity and higher interest rates!
Also Read: Why Fixed Deposit (FD) is a Good Investment?
Choosing between a sweep-in Fixed Deposit (SWFD) and a regular Fixed Deposit (FD) can be confusing. Let's compare them side-by-side to help you make an informed decision:
| Feature |
Sweep-in Fixed Deposit |
Regular Fixed Deposit |
| Liquidity |
High |
Low |
| Interest Rate | Higher than Savings Account, lower than regular FD | Fixed and usually higher than Savings Account |
| Flexibility |
Automatic transfers based on a set minimum balance |
Fixed deposit amount chosen upfront |
| Premature Withdrawal |
Usually allowed with penalty charges |
Often penalised with loss of interest and/or principal |
| Minimum Investment |
Varies by bank, generally lower than regular FD |
Varies by bank and tenure |
| Suitability |
For those who want high returns with partial liquidity |
For those seeking stable, high returns and don't need immediate access |
INDIE introduces a versatile financial tool, the Auto Sweep Fixed Deposit facility. It is designed to enhance liquidity and ensure your funds are readily available for urgent financial needs.
What is Auto Sweep fixed deposit?
INDIE's auto sweep fixed deposit allows you to invest surplus funds in a fixed deposit and withdraw the funds when you need them. This helps you make the most of your money without sacrificing liquidity. The minimum deposit amount varies based on the type of account. The interest rates applicable to term deposits, including any senior citizen benefits, are extended to the Sweep In/Sweep Out deposit facility. This ensures that your funds not only remain liquid but also have the potential to generate returns.
Also, Tax Deducted at Source (TDS) is applicable to the interest earned on the term deposits within the Sweep In/Sweep Out facility. Complying with regulatory norms, this deduction ensures seamless tax management for the account holder.
Recognising the dynamic nature of financial needs, INDIE allows premature closure of the fixed deposit. This feature provides account holders with the flexibility to access their funds before the agreed-upon tenure, catering to unforeseen financial exigencies.
INDIE's auto sweep deposit facility emerges as a strategic solution, blending safety, liquidity, and earnings. By seamlessly integrating with your Savings Account, this facility ensures your funds remain dynamic and responsive to your financial requirements.
Experience the convenience of liquidity without compromising on returns, making your financial journey more fluid and adaptable.
Sweep-in Fixed Deposits can be a powerful tool for managing your finances and boosting your savings. By understanding the mechanics of the process and keeping in mind some key considerations, you can make the most of this option while also balancing your need for liquidity and higher interest rates. As always, it's important to consult with your bank or financial advisor to determine the best approach for your specific circumstances and goals. With the right strategy in place, you can enjoy the benefits of a SWFD while also maintaining a solid financial foundation.
Start a Fixed Deposit Today!
