06 February 2024 | By INDIE
With the rising inflation, simply keeping funds idle lying in a savings account is not a viable option. It is essential to make investments to grow your wealth and secure your financial future. Now, if you are not comfortable with investing in instruments that are susceptible to market risks, it is advisable to opt for fixed deposits (FDs). Fixed deposits offer guaranteed returns and ensure that your funds are secure.
While investing in fixed deposits is a smart move, you also have to worry about having the funds at your disposal in case of any emergency. This is where the facility of a sweep-in FD is useful. Depending on the type of account you have with a bank or Non-Banking Financial Company (NBFC), you can decide the amount that is to be transferred into a fixed deposit and whether you want to link the account to your savings account or current account.
Read on to learn more about the sweep-in facility in detail:
The sweep-in facility, also known as the auto-sweep facility, allows you to convert surplus funds in your savings account above the predetermined threshold into a fixed deposit. Using this feature, you can optimise your money by considering how much money you need for your monthly expenses and accordingly setting the threshold. Once you do this, whenever your balance goes above this threshold, the excess funds will automatically be transferred to a fixed deposit so that you can enjoy higher interest rates.
One of the key advantages of the fixed deposit sweep-in facility is the liquidity it offers. You can now enjoy the convenience of withdrawing funds from your account anytime via ATMs, internet banking, or by writing a cheque, without worrying about the balance. The bank will link your fixed deposit to your savings account, ensuring an automatic reverse sweep. If your savings account falls under the required balance, funds will automatically get transferred to the account from the FD.
By opening a sweep in FD you get to make the most of your money. Instead of letting your hard-earned money sit idle in your savings account earning a low interest rate, you can earn higher fixed deposit interest rates. Over time, this can boost your capital and bring you closer to your financial goals.
You have the flexibility of choosing the period of your deposit as well as the amount to be invested. You can withdraw the funds from your auto-sweep FD and only lose interest on the funds withdrawn, effectively safeguarding your investment.
You can link multiple deposits to your savings account for the sweep-in facility. With multiple deposits, the bank follows the LIFO (Last in First out) rule wherein once the sweep-in facility is activated, funds will start getting transferred from the last deposit linked to the savings account.
Minimum balance requirement: Every bank can have varying requirements when it comes to the minimum balance requirements for auto-sweep FDs.
Minimum amount required to trigger the sweep-in facility: It is important to be aware of the minimum amount that is required for triggering a fund transfer from your savings account to the auto-sweep fixed deposit.
Tax implications on the interest earned: Do note that the interest earned via the sweep-in fixed deposit can be subject to taxation as per the prevailing income tax rules.
If you are looking to take advantage of the auto-sweep fixed deposit facility, you can consider opting for an Indie savings account and enjoy a higher rate of interest on your funds. You also get to utilise your FD funds for payments when your savings account balance runs low. Apply for your own Indie FD account today!
