What is Sweep-In FD :On fixed deposits, investors get more or almost double the interest than bank savings accounts. These days, while the interest rate on bank savings account is 3.5 to 4 percent per annum, the interest rate on fixed deposits is 7 to 8 percent. However, due to blocking of investors’ money in FD for a fixed period, the facility of immediate liquidity is not available. Because of this, many people leave money lying in their savings account. But if you want high interest rate along with liquidity then Sweep In FD option can be useful. Let us know what is Sweep in FD and how it works.
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What is sweep in FD?
The sweep-in facility of FD allows the investor to transfer excess funds in the bank account to the FD account. That is to say, sweep-in-FD is an auto-sweep service. Under this, whatever extra money there is in your savings account is transferred to FD. That is, it is a type of fixed deposit that allows investors to automatically transfer excess money from their savings account to the FD account. In this, while you get interest equal to FD, you can access your funds immediately even in emergency.
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Limit has to be set
For this, you will first have to set a threshold limit for your account. Money exceeding this limit will be considered extra money. Although the sweep threshold limit is decided by the bank itself, it also gives the account holder the option to customize it as per the need. This is the limit beyond which if the money is exceeded, the amount is automatically transferred to the FD account. In this way, the limit you have set can be used as an emergency fund, while you will start getting FD interest on the extra fund.
Duration and minimum investment
The tenure of Sweep in FD is from 1 year to 5 years. Whereas banks generally transfer the amount from savings account to sweep-in FD in multiples of Rs 1,000. Some banks also allow transfers in the range of Rs 1 to Rs 1000 as per the instructions of the investors.
Also read: FD Rates: These banks are offering highest interest on FD of 1 to 3 years, check the list before investing.
what is the interest rate
The interest rate for sweep-in FD account is the same as any normal FD (Best Sweep In FD Rates). It also depends on the period of investment. Like in FD, different interest rates are fixed for different periods. Details of interest rates for different periods in banks…..
Axis Bank: 5.75%-7.00%
SBI: 4.75%-6.50%
HDFC Bank: 4.50%-7.00%
ICICI Bank: 4.50%-6.90%
Canara Bank: 5.50%-6.70%
Bank of Baroda: 5.50%-6.50%
PNB: 4.50%-6.50%
IDBI: 4.50%-4.80%
Indian Bank: 3-50%-6.10%
Yes Bank: 4.75%-7.00%
Post Office: 6.90%-7.50%
RBL: 4.75%-7.00%
IDFC Fist: 4.50%-7.00%
(Source: Groww)
Also read: FD Rates: Which bank is getting the highest interest on senior citizen FD, check the list of banks before investing.
What are the rules for withdrawing money?
Generally, sweep-in FDs use the Last In First Out (LIFO) method while withdrawing money from your sweep-in FD before its maturity. This means that if your bank savings account balance is less than the amount required to pay a check or SIP, the amount is withdrawn from the sweep-in FD using the LIFO method. That is, sweep-in FD provides you high level liquidity along with attractive interest rates.
If you often withdraw money from sweep-in FD, then the amount withdrawn will earn the same amount of interest for the number of days it remains invested. Through the sweep-in facility, the additional amount invested in the FD can be withdrawn without breaking the entire FD. Also, there will be no penalty for withdrawing swept-in money from bank FD.
