In a savings bank account, Flexi and Sweep in fixed deposit services can offer a convenient way to get decent returns on your savings. That being said, you can not get the optimal return if the services are not used efficiently. That being said, you will sacrifice interest if you regularly make withdrawals from your savings account integrated to flexi and sweep in fixed deposit facilities. In addition, the estimation of the returns will also exacerbate this, finding it impossible to determine how much income you have genuinely qualified to acquire over the year. Now let's explain how you can deal with flexi and sweep in fixed deposit facility.
What do you mean by sweep-in fixed deposit?
Banks support their customers with a sweep-in fixed deposit facility in which the saving account of the customer is directly linked to a fixed deposit account. The savings account owner has to set a particular money transfer cap within a specific tenure period to allow use of this service (the term of the deposit is generally one year, but it can go up to a limit of 5 years and can vary from bank to bank and even the rate of interest can differ respectively. The excess balance is instantly transferred to the linked fixed deposit account when the amount in the savings account rises over the cap.
For e.g., for one year, you've linked your savings account with your FD account having sweep in facility. For e.g., for one year, you've linked your savings account with your FD account sweep. You will also have to raise the cap above which any balance will automatically be credited to the FD account when you opt for the sweep-in feature. Deposits with sweep in facility are normally only accessible to premium account holders for longer periods, such as 181 days or 366 days. The interest might not be compounded in certain situations, though.
What do you mean by flexi-fixed deposit?
It is a special form of deposit strategy that banks provide to the customers. The depositor is allowed to manually transfer money to their bank account in the flexi-fixed deposit. Both the stability of savings accounts and the high yields of fixed deposits are provided to the holder of a flexi fixed deposit account. As stated, the account holder has to manually release the deposit for the required tenure in a flexi deposit, whereas any balance beyond a limit is swept into a fixed deposit in a sweep in deposits. In comparison, amounts are immediately swept out in the event of a deposit sweep, without any cost, when the total balance in the savings account is low.
How Can I Make The Best Use Of Both The Facilities?
Both sweep-in and flexi-fixed deposits can help you to cover emergency funds as they fall with liquidity and have better returns. Although deposit sweep offers flexibility, it can only be preferred if the depositor has made minimum transactions and he or she is willing to retain securities for longer periods. Although deposit sweep offers flexibility, it can only be preferred if the depositor is willing to retain securities for longer periods and not have too many transactions. Depositors should read the terms and conditions of the minimum limit, the approach used for reversing funds, along with other considerations, before saving or opting to make deposits. Banks have various systems for their auto-sweep service, and in order to exploit them successfully, it is important to grasp them explicitly. First of all, while some banks which enable you to adjust the minimum average balance above which the money will be transferred to an FD in your savings account, most banks have a specified FD minimum average balance and maximum cap.
The facility should be used wisely, as most banks do not impose a penalty for breaking the auto-sweep FDs. It is best not to prefer your savings/salary account as an auto-sweep. It is suggested because the amount above the minimum average balance will be transferred into one or more FDs each time your money hits the auto-sweep savings account. The balance in the savings account is drained over the month, when you pay for various expenditures, and any of the FDs will be liquidated to transfer the funds into the auto-sweep savings account. If you sometimes make withdrawals from the FD, no matter how much you deposited into the account, you will miss out the interest. Therefore, you can set up a sweep-in or flexi fixed deposit facility for a non-primary savings account to generate a fund that you can fall into only during crises in order to reap decent returns on your savings account deposits.