Auto-sweep can earn FD rates on surplus savings funds

The Story in Brief

Banks’ auto-sweep service can move money above a set balance in a savings or current account into a fixed deposit, Business Today Bazaar reports. The account holder continues to keep the chosen threshold available for regular use, while the surplus earns the bank’s FD rate instead of the usual savings rate.

For example, with a Rs 20,000 threshold and Rs 80,000 in the account, Rs 60,000 would be transferred to an FD automatically. Business Today Bazaar says savings rates are often around 2.5%, compared with roughly 6.5% to 7% for regular-customer FDs, though rates and terms vary by bank. Customers generally need to request activation from their bank.

The Indian Opinion

The easy claim that auto-sweep offers the best of both worlds needs a check. Banks may apply different thresholds, sweep rules, premature-withdrawal conditions and tax treatment. The promise of nearly three times the interest also depends on the bank’s current rates and how long the money stays invested. Before activating it, customers should ask for the exact terms, especially how much remains liquid and what happens when a withdrawal breaks an FD. The decisive comparison is the net return after penalties and tax.

Source: bazaar.businesstoday.in

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