You may have well heard the term savings account and current account, but, a Flexi-Deposit Sweep in something that you do not hear too often.
How this Flexi Deposit Sweep in works?
You begin by opening a savings account and than instruct the bank, that in the event of the amount in saving account rising above a certain amount, you would like it to be auto swept for a fixed deposit.
Let us say that you want an auto sweep for a Flexi Deposit, if the balances in your savings account crosses Rs 25,000. In that case each time the available balance crosses Rs 25,000, the amount is swept into a fixed deposit.
What this means is that you earn a fixed deposit interest rate of 7-8 per cent, as against 4 per cent in a SB account.
The other advantage is that in case you need the amount, the bank breaks the latest deposit, so you continue earnings fixed deposit interest rates on the earlier one.
This is because the latest deposit, which has been swept in would earn the lowest interest rate, because of its shorter tenure. So, the bank in breaking the latest fixed deposit that was swept-in is helping customers, who would gain on the old ones.
Interest rates on fixed deposits would apply and tax deducted at source would be applicable as the case maybe.