Auto Sweep Fixed Deposits: A Smarter Approach To Saving And Investing

Saving and investing are essential for financial stability and growth. However, most investment options come with lock-ins and risks, which may hamper investors’ flexibility in managing their funds. While Fixed Deposits (FDs) provide security, they have a tenure period before which one cannot withdraw funds without incurring penalties. Auto sweep Fixed Deposits address this issue effectively.

The concept behind Auto sweep FDs is simple. When individuals open a savings account online or offline with a bank offering this facility, they can specify a minimum threshold they want to maintain in the account. Any amount exceeding this threshold will be automatically transferred to a linked FD account. This way, investors can make the most of their idle funds. What’s more, sweep-in and sweep-out options can be personalised according to individual needs.

Discussed below is how auto sweep FDs offer a smarter approach to saving and investing.

  • Combating inflation with FD rates

Inflation erodes the purchasing power of money over time. Thus, it is crucial to find investment avenues that beat inflation. Auto sweep FDs offer a solution to this problem. Since a portion of the funds remains in the savings account, it is readily available for emergencies or unforeseen expenses. Moreover, the money swept into the FD provides higher returns and serves as a hedge against inflation. This way, the idle money is always put to work, earning better than savings account interest rates.

  • Flexible tenure choices

Most banks allow investors to choose the period of their deposit. This flexibility helps investors tailor the FD tenure to their specific goals and liquidity needs. They can align their investments with short-, medium-, or long-term objectives. This level of control makes auto sweep FDs a smarter choice for investors seeking a customised and goal-oriented approach to saving and investing.

  • All time liquidity

There are no penalties for partial withdrawals, making these FDs a flexible and practical investment option.

For instance, you have Rs. 20,000 in your FD. You issue a cheque for Rs. 15,000 while your online savings account has only Rs. 10,000. In such a case, the bank will transfer Rs. 5,000 from the FD to cover the cheque.

  • Customisable investment strategy

Every individual’s financial goals and risk appetite vary, which is why one-size-fits-all solutions may not suit everyone. Auto sweep FDs provide investors with the flexibility to customise their investment strategy according to their preferences. They can set the threshold limit for the automatic sweep as per their needs, determining how much money should remain in their savings account and how much should go into the FD.

This customisation empowers investors to maintain a balance between liquidity and returns, helping them align their investment approach with financial goals.

How to apply for the auto sweep FD facility?

NetBanking is the easiest way to apply for the auto sweep FD facility.

  • Login to NetBanking.
  • Navigate to the ‘Fixed Deposit’ section on the website or app.
  • Look for the option labelled ‘Fixed Deposit Sweep-in’ or similar.
  • Choose the Savings Account and the specific FD to link for the facility.
  • Click the ‘Continue’ tab to proceed with the activation process.

With its ability to address inflation concerns, promote better spending habits, offer FD-like returns without any penalty on premature withdrawals, and provide customisation options, Auto sweep Fixed Deposits cater to the different financial needs of investors. Simply compare different types of savings accounts and banks with Auto sweep facility and adopt a smarter approach to saving and investing.