With rising inflation, the cost of living in large cities in India has significantly increased, making it difficult for individuals to save monthly. The ‘sweep-in’ or ‘auto-sweep’ feature offered by online savings accounts helps individuals save a certain amount every month by depositing it in their FDs (fixed deposits).
What are sweep-in savings accounts, and how do they help customers save more?
Sweep-in savings accounts are online savings accounts that are linked to fixed deposit accounts opened by the customer. This feature helps a customer automatically save excess funds in their savings account by depositing them in an FD with a high interest rate. You can decide the threshold beyond which the excess amount can be swept into a fixed deposit account. For instance, if you have a sweep-in savings account with a threshold of ₹10,000 and you deposit ₹50,000 in your account, ₹40,000 will be automatically transferred to your FD account. Both these accounts will help you earn interest, thereby increasing your savings.
Benefits of the sweep-in feature in savings accounts:
- You can earn high interest and save more: If your online savings account is a high-yield savings account and your FD offers a high interest rate, you can use the sweep-in option to earn significantly high returns. Opening an online sweep-in savings account can help you put your idle savings to work and earn more returns.
- Premature withdrawals are not penalised: Unlike regular FDs, the bank will not charge any penalty from you if you wish to withdraw the funds in your FD. The bank also does not impose any conditions on withdrawals.
- Customers can conveniently open and access a sweep-in savings account: Sweep-in savings accounts are extremely flexible. You need not even open your mobile banking app to initiate a transfer from your savings account to your FD once the threshold has been crossed. The automatic transfer feature ensures optimised fund utilisation and helps you meet your short- and long-term financial goals.
- The sweep-in feature offers high liquidity to customers: The funds in a sweep-in savings account and its related FD can be accessed at all times by the customer. As mentioned earlier, the bank does not charge any penalty from customers who wish to access their FD funds at any time. These two features combined offer high liquidity to the customer while also consistently increasing their savings.
Points to consider before choosing a sweep-in savings account:
Here are the points that you must consider before selecting a sweep-in savings account:
- Assess your monthly spending patterns: You must assess whether you receive any extra income on a monthly basis, and how often you receive this income. You must also check how often you withdraw from your savings account monthly.
- Analyse the interest rates for FDs and savings accounts: You must opt for a high-interest FD and a high-yield savings account to benefit most from a sweep-in savings account.
- Check if the bank has a minimum balance requirement: If the bank has such a requirement, you must assess if you can meet that requirement to avoid any penalties.
You can calculate your interest rate using an online financial calculator before opting for an online savings account. You must always ensure that your sweep-in savings account helps you meet your monthly savings goal.
