Fixed Deposit Sweep-in is an extended facility provided by banks and financial institutions to their customers. This is a facility in which the excess of the funds in a particular account gets transferred into a fixed deposit for a tenure of 1 year. The amount which gets transferred into Fixed Deposit earns a higher rate of interest as compared to the normal savings or current account. This facility is called sweep facility and is linked to a customer’s savings or current account. If the bank is providing sweep facility to their customers then one can opt for it and specify the amount they want to sweep into the Fixed Deposit. Hence we see that Fixed Deposit sweep in is a brilliant option in order to maximize ones’ idle money in a proper way.
Sweep in Facility Procedure
A customer who wants to avail this facility will have to link their savings or current account with this facility. Here the customer has to set a threshold limit and any amount above this limit gets automatically transferred into Fixed Deposit. For example, if a customer has Rs. 1 Lakh fund in their savings account and the minimum balance to maintain in his account is Rs. 10,000 then any amount above Rs. 10,000 i.e. Rs. 90,000 gets automatically transferred into Fixed Deposit. Sweep-in facility also helps if there is insufficient fund in the savings account. Now if there is insufficient funds in your savings account then as per your instruction, the bank will transfer the funds from Fixed Deposit to savings account. The interest lost will be only on the amount that is swept and not on the full amount that is there in the deposit.
There is an eligibility criteria for sweep in account, one need to open a fixed deposit of minimum Rs 25,000/- or else one can open a premium account wherein they have to maintain a minimum balance ranging from Rs. 25,000 to Rs. 1,00,000 on either a monthly or quarterly basis.
Factors to consider before availing FD Sweep-in Facility
Different banks work differently for this sweep in Fixed Deposit. Therefore one should go through all the terms and conditions before availing this facility. Some of the parameters are discussed below:
- Threshold Limit: There are some banks who have fixed threshold limit while there are banks who give you an option to set your own limit. A bank which offers lower threshold limit can help in earning higher returns on ones savings.
- Interest Rates: The interest rates which the bank offers on this sweep facility may be similar to the normal Fixed Deposit. There are banks which offer an extra interest rate to senior citizens which may not be the case in sweep facility.
- Minimum Tenure: The customer should always know the minimum tenure for this sweep in facility. Sometimes the banks offer a very low interest rate on the fixed deposit if we do not maintain a tenure of minimum 30 days. Auto sweep accounts have a fixed tenure of one year. There are banks who may charge penalty for breaking the FD before the tenure.
- Withdrawals: Customer should be aware of the withdrawal process. They should find out if the bank is allowing all modes of withdrawal i.e. through cheque, ATM, or bank branches. If a customer withdraws money quite frequently from this account then they would lose interest as the interest is calculated by any bank on the number of days a customer keeps the Fixed Deposit in bank.
- Taxation: The interest earned on Fixed Deposit is taxable as per the income tax slab whereas the income earned on the savings account is tax exempt up to Rs. 10,000 a year.
Fixed Deposit sweep in suits mostly those type of customers who have huge balance in their savings account and need to withdraw only a limited number of times. Sweep accounts are mostly in use to those type of customers who have some money left over at the end of the month after meeting up all the expense of that particular month.
Advantages of FD Sweep-in Account
- In Sweep in account one do not lose interest on Fixed Deposit, they only lose interest on the amount drawn from the Sweep-in account.
- The interest earned will be on the higher side compared to the regular savings account.
- There are many banks which offer the customer a facility to link multiple Fixed Deposit to their Sweep account.
Thus a Fixed Deposit Sweep in account is a special facility given by banks to their customers in order to maximize their idle savings in a proper manner.