Auto sweep facility: Earn FD return in savings account - here's how

Auto sweep facility: A savings account is simply an interest-earning deposit account held with a bank or post office. A person having a savings account can easily manage his/her monthly savings, expenditures, and investments. Besides ensuring safety and easy access to your money, savings account also earn a modest return. The interest rate on savings accounts varies from bank to bank and usually ranges from 2.50 per cent to 4 per cent. But there are ways to get a higher return on a savings account. Here, we will tell you about the auto sweep facility that banks provide to their customers, offering a return equivalent to fixed deposits. 

With an auto sweep facility in a savings account, an individual can earn higher returns. An auto sweep facility is basically a combination of both a fixed deposit account and a savings account. If a person opts for an auto sweep facility in his savings account, then he will earn returns similar to FDs.

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An auto sweep is an automatic facility wherein an amount above a limit is converted to a fixed deposit and therefore attracts higher returns than savings accounts. In other words, the amount deposited in a savings account above a defined limit automatically gets transferred into an FD.

How It Works

Whenever the balance in a savings account with an auto sweep facilty is above the threshold limit, the surplus amount will be transferred to the FD account directly (sweep-in). Each account earns its own interest.

What makes this auto sweep facility more attractive is the liquidity. When the surplus amount is converted into a fixed deposit, then it doesn't mean that you cannot withdraw that excess money from your savings account. The surplus amount can be transferred back to the savings account from the fixed deposit account whenever required. This process is called ‘reverse sweep'.

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For instance, 'A' has opened a savings account with an auto sweep facility and the minimum balance required is Rs 5,000. 'A' has deposited Rs 50,000 and fixed a threshold limit of Rs 10,000. The excess amount of Rs 40,000 will be transferred to the FD account. In this case, both accounts will earn their respective interest rates. In case there is a reverse sweep, the transferred money will not earn the FD interest rate. 

It is, therefore, advisable to deploy your idle funds in FDs through an auto sweep facility in a savings account to earn more returns compared to leaving funds untouched in a savings account.