Q: What is a sweep-in FD? – Bhaskar
A: Everybody wants to earn higher interest on their saved money. However, saving accounts allow a low return which is around 3.5% to 6% p.a. by most banks. So, banks also offer the facility of a sweep-in fixed deposit under which your fund lying in the bank account is automatically transferred to an FD account. Thus, you can earn a high return on your idle fund using this facility.
The account holder gets the option to determine the balance beyond which the amount would be transferred to the sweep-in FD. The interest on the sweep-in deposits usually depends on the period for which your fund is held in the FD. For example, suppose Rs 10,000 is transferred in sweep-in for 30 days, then the bank will allow interest based on its 30 days FD slab.
You can withdraw the money anytime from a sweep-in deposit. If the balance in your linked saving account is insufficient, the sweep-in FD will automatically get liquidated. So, if you frequently get funds for a short duration, then sweep-in FDs can help you to earn higher interest in comparison to a savings account.
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