Quick Summary
Auto Sweep Facility is a banking feature in savings accounts which helps to converts excess balance above a set threshold automatically into a fixed deposit to earn higher interest rates. How Auto Sweep Facility Works? To activate this facility, you have to set a minimum amount to keep in savings
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The Auto Sweep Facility is a banking feature where excess funds in your savings account, above a predetermined minimum balance, are automatically transferred into a Fixed Deposit (FD) to earn higher interest.
You set a minimum balance for your savings account. Any amount exceeding this threshold is automatically swept into an FD. If your savings balance falls below the threshold, the bank automatically breaks the FD and moves the funds back to your savings account.
Benefits include higher returns on excess funds (earning FD rates instead of savings rates), automatic operation, the liquidity of a savings account with partial withdrawal options, and the convenience of managing everything within a single account.
Drawbacks can include penalties for premature FD withdrawal, potentially confusing account statements due to sweeps and reversals, the need to maintain a specific threshold balance, and taxable interest on the FD portion.
Auto Sweep might not be ideal if you tend to withdraw funds frequently, as this can lead to penalties. In such cases, a regular savings account or manual long-term FDs might be more suitable.
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