For those who get very unstable amounts in their savings account, it is a must for such individuals to open either a flexi-deposit account or a sweep-in account.
Let us not try to understand why these accounts are important. Say Sameer is a trader or investor, who wishes to invest when the market falls.
How does the Sweep in account work?
If you have large balances in your savings account, you can ask the branch to transfer the amount to a fixed deposit. However, you may need the money after sometime, in which case you can ask the bank to once again transfer it to a saving account and make your payments accordingly.
You have to inform the bank as to how much money from the account, you would like to sweep-in to create a fixed deposit. So, if you have a balance of Rs 50,000, you might want to sweep in an amount of Rs 30,000.
What this means is that the Rs 30,000 would start fetching you an interest rate of around 7-8 per cent (present fixed deposit interest rates), as against keeping it at an interest rate of 4 per cent, which we get in a savings bank account.
How A Flexi Deposit Account Works?
A Flexi Deposit Account is almost similar. You initially open a fixed deposit account which is linked to your savings account. So, when there is a shortfall in the savings account, it is reduced from your fixed deposit account.
Let's cite an example. Let's say you have zero balance in your savings account and have issued a cheque of Rs 100,000. If you have a flexi deposit of Rs 2,00,000 the bank will take away Rs 1 lakh from the Fixed Deposit and honour the cheque.
Thus, the remaining portion of Rs 1 lakh from the FD of Rs 2 lakh, will continue to fetch you interest. This is a big advantage of a flexi deposit.
So, which is better - a Flexi Deposit or a Sweep-in Account?
The purpose of both is different. If you have a large sum of money in a fixed deposit, you might want to choose a Flexi-Deposit over a Sweep-in Account. On the other hand, if you keep receiving amounts that are uncertain, you might want to choose a sweep-in account over a Flexi Deposit Account. The purpose of both these accounts if different and hence you need to discern accordingly.The choice is completely yours.