What is savings account auto sweep? EXPLAINED
Auto Sweep is a banking feature that enables you to automatically transfer excess savings account funds into fixed deposits for higher interest returns, providing one of the best ways to expand your corpus while still remaining flexible and liquid. But how do you know if an Auto Sweep facility should be implemented into your bank account?
For an in-depth understanding of savings account auto sweep, let’s first take a closer look at its functionality. Auto sweep works by automatically moving funds from your savings account into an FD when reaching a threshold limit – this is done by linking both accounts together and setting an agreed upon monetary limit; once your savings balance passes this threshold limit it is transferred over into an FD with higher rates than traditional savings accounts would offer.
When your savings account falls below its threshold limit, when its balance falls below that threshold limit it automatically transfers back into a savings account and you receive lower interest than would be earned with an FD; this process is known as sweep-out.
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Auto sweep can be an invaluable feature for business owners or salaried individuals alike, helping to build your corpus while keeping funds accessible for immediate needs such as paying an EMI or processing a cheque. Furthermore, this feature can also be used to invest in mutual funds; but before making the commitment it’s essential that you check minimum FD term requirements to determine if this feature suits you.
Furthermore, it’s essential that you check the rate of return of your FD account to see if it offers greater benefits than savings accounts. Bank rates differ substantially in this respect and it would be wise to conduct research in order to select an FD account which offers maximum interest returns for your money.
An attractive fixed deposit (FD) rate can save you thousands in the long run, but keep in mind that an FD account is taxed, while savings accounts do not. Therefore, it would be wise to not invest more than what you can afford to lose if your plan involves using your funds later on.
When selecting an FD account, the length and maturity date should be carefully considered. Some FDs require a minimum term commitment while others allow you to withdraw funds without penalties. Longer-term investments tend to earn higher returns; it is best to discuss this with your bank to find what suits your individual circumstances best. An online FD interest calculator is an invaluable resource when researching various terms available – for example, opt for at least 30 day terms while avoiding those with maturity dates less than this milestone in order to avoid penalty charges and any unexpected charges from appearing within that timescale.