It is a commonly known fact that the interest on a savings account is minimal and idle funds in the same do not generate high returns. Nonetheless, you need to maintain some balance to meet sudden monetary requirements.
If you wish to get liquidity while earning better returns, here are two such options:
- Sweep-in facility
With this feature, you may pre-determine a threshold limit that is maintained in your savings account. The amount exceeding this limit will be directly converted to a fixed deposit (FD). You will earn interest at the prevailing rates for the duration the money remains in the FD. You do not have to worry about your checks not getting cleared due to low balance. In case of any deficit, it is covered from the sweep-in FD.
- Flexi fixed deposit
In addition to a savings account, you will need to open an FD to avail of the Flexi fixed deposit feature. The FD and the savings account are merged and any shortfall in balance is covered through a transfer from your FD.
Difference between sweep-in and Flexi deposit
When you opt for the sweep-in facility, any amount that crosses the threshold limit (as specified by you) is converted to an FD, and you earn income as per the current fixed deposit interest rates. Additionally, there is no penalty in case you need to use the funds from the sweep-in deposit.
Conversely, with the Flexi deposit feature, you need to manually start an FD with the financial institution, which is then linked to your savings account. The income of such deposits is calculated as per the present FD rates. Some institutions may levy a pre-maturity withdrawal penalty in case you need to use the funds from the FD, which is connected to your savings account.
A sweep-in facility is more convenient, as it is automatic once the account balance surpassed the threshold limit. The Flexi deposit needs to be manually created and linked every time the balance exceeds, which makes it more cumbersome and time-consuming.
In addition to the banks, non-banking finance companies (NBFCs) like Mahindra Finance offers FDs at attractive rates. Visit the company’s websiteto know about the fixed deposit eligibility, interest rates, and other terms and conditions.
