Auto Sweep Bank Account 2023: Introduction, Benefits, Terms. Most of us maintain a savings account in a bank that offers a meager interest rate of around 4% per annum. This rate hardly yields significant returns. Consequently, Automatic sweep account, Interest rates many opt for fixed deposits, which are favorable if you can commit to a specific duration without requiring the funds. However, sometimes urgent financial needs arise, leaving the money tied up in the fixed deposit. How do we address this situation?
Enter the Auto Sweep Account, a solution to this dilemma. This facility enables a seamless transition between a savings account and a fixed deposit, allowing you to earn better returns without a lock-in period. It’s a way to optimize returns while ensuring liquidity. Discover more about the “Auto Sweep Bank Account” below.
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Auto Sweep Bank Account
What is an Auto Sweep Account?
An auto sweep account combines your savings account with fixed deposits. It involves a threshold amount, beyond which the excess funds automatically convert into a fixed deposit. For instance, if Mr. Raheja maintains Rs. 55,000/- in his SBI Bank Account and the threshold limit set by SBI is Rs. 25,000/-, the bank will transfer the surplus amount (55,000 – 25,000 = 30,000/-) into a fixed deposit. Even if Mr. Raheja withdraws Rs. 10,000/-, the fixed deposit remains intact, and the withdrawal is honored from the savings account balance. However, if Mr. Raheja withdraws Rs. 25,000/-, the bank will honor Rs. 15,000/- from the saving bank account and Rs. 10,000/- from the fixed deposit, along with accrued interest.
Why switch to an Auto Sweep Account?
Savings accounts typically offer an interest rate of 4% per annum, while fixed deposits yield higher returns ranging between 6.5% to 8%. However, fixed deposits might need to be broken in case of emergencies. An auto sweep account combines the advantages of both, offering higher interest rates of 6.5% to 8%, providing better returns without the need for breaking deposits. For instance, if Mr. Rahim had opted for an auto sweep account for his Rs. 5,00,000/- savings, his interest might have doubled at an 8% rate. Automatic sweep account
Which banks offer Auto Sweep Account facilities?
Most banks provide this facility under various names:
- SBI bank: Multi Option Deposit Scheme
- HDFC Bank: Sweep in facility
- ICICI Bank: AUTOSWEEP
- Bank of India: BOI SAVING PLUS SCHEME
- OBC Bank: FLEXI FIXED DEPOSIT SCHEME
- Allahabad Bank: FLEXI-FIX DEPOSIT
Some Important Terms
- SWEEP IN: The process where excess funds move from the savings account to a fixed deposit when they surpass the threshold limit is termed as a Sweep in.
- THRESHOLD LIMIT: This is the limit beyond which surplus funds are converted into a fixed deposit.
- REVERSE SWEEP: In cases where funds move back from the fixed deposit to the savings account to honor withdrawals, it is referred to as a Reverse Sweep.
Auto Sweep Bank Account FAQ
An auto sweep account merges a savings account with fixed deposits, automatically converting excess funds beyond a set threshold into a fixed deposit.
An auto sweep account offers higher interest rates (6.5% to 8%) compared to the typical 4% offered by savings accounts. It combines the benefits of savings accounts and fixed deposits without the need to break deposits during emergencies.
Various banks offer this service:
SBI Bank: Multi Option Deposit Scheme
HDFC Bank: Sweep in facility
ICICI Bank: AUTOSWEEP
Bank of India: BOI SAVING PLUS SCHEME
OBC Bank: FLEXI FIXED DEPOSIT SCHEME
Allahabad Bank: FLEXI-FIX DEPOSIT
SWEEP IN: When excess funds move from the savings account to a fixed deposit.
THRESHOLD LIMIT: The limit beyond which excess funds convert into a fixed deposit.
REVERSE SWEEP: Funds move back from the fixed deposit to the savings account to honor withdrawals.