Auto Sweep is a facility provided by the bank that link your Savings Bank account with the Fixed Deposits account. It ensures that any extra amount lying in your bank account above the limit is automatically transferred to fixed deposits accounts and you earn more interest on your money.
To make auto sweep facility work you define a limit and money up to that limit will be in the form of cash in your savings account and the amount above this limit will be converted into a Fixed Deposit automatically and you will start earning normal FD returns on that part of the money.
How Auto Sweep works?
For instance, you open a new Savings Bank account in a bank and enable an Auto-Sweep facility. You define the threshold limit of Rs 50,000. Now suppose you have Rs 10,000 lying in the bank, you will be earning normal 3-3.5% interest on this money.
After some time if you deposit Rs 60,000 in your account, your total balance would be 70,000. But as this is above your defined limit, the extra amount of Rs 20,000 will be converted into a fixed deposit automatically.
In this way you will always have 50,000 in your account.
Sweep Back - When you need Money
Another feature of auto sweep facility is that whenever you want money more than in your savings account, the amount kept in the Fixed Deposits is sweeped back into your savings bank account. Isn’t this great!
Let’s consider the same example; suppose you want to withdraw 30,000 from your account, you will actually be withdrawing it from the savings account. This withdrawal will reduce the balance to 20,000. But if you want to withdraw Rs 80,000 then in this case, an additional Rs 30,000 will be automatically reversed from your Fixed Deposit into your account enabling you to withdraw Rs 80,000.
This is the beauty of Auto Sweep facility. From this article you must have understood that how beneficial this facility is for the users!
Auto sweep facility is really a boon to those who have fluctuating funds in the savings account.Whenever the funds will exceed the threshold limit , excess amount will be automatically converted into fixed Deposit.Conversely , whenever required fixed Deposit can be easily liquidated and transferred to savings account directly.