Auto Sweep Facility

Understand how auto sweep facility can help you earn higher interest.
Auto Sweep Facility
3 min
20-March-2024

Smart financial management is not just about saving, it is about making your savings work for you. An auto sweep is one mechanism that can help. This feature, often paired with Fixed Deposit (FD), offers an automatic way to earn more interest without sacrificing easy access to your money.

What is an auto sweep facility?

An auto sweep facility is like a financial bridge between your savings account and a fixed deposit. It automatically transfers extra money from your saving account to a fixed deposit when your balance exceeds a certain amount. If you need those funds later, the facility smoothly transfers them back into your savings account. This lets you earn better returns without worrying about having enough cash on hand.

FD are the great option to invest your money as they offer guaranteed returns, and their interest rate are not affected by market fluctuations.

How an auto sweep facility works

Imagine your savings account and a fixed deposit are linked together. FDs generally offer higher interest rates than regular savings accounts. Here is how an auto sweep works:

  1. You set a limit: You choose a threshold amount for your savings account. This is the minimum amount you want to keep into your saving account.
  2. Extra money gets moved: When your savings balance goes above your set limit, the extra money is automatically transferred to your linked FD.
  3. Easy access: If you need to withdraw money and your savings balance falls below your limit, funds automatically transfer back from the FD into your savings account.

Let us understand this with an example

Let say you have Rs. 70,000 in your savings account and your monthly expenses are around Rs. 20,000. You set your savings account limit at that amount. With Auto Sweep, the remaining Rs. 50,000 is automatically transferred into an FD, where it starts earning higher interest.

Now you need some extra cash for an unexpected expense. Auto Sweep conveniently transfers the amount you need, say Rs. 10,000 from your FD back to your savings account. This ensures you have immediate access to your funds while keeping the rest of your money invested and growing in the FD.

Benefits of auto sweep facility

  1. Provides liquidity
    With an auto sweep facility, you will enjoy both flexibility and the potential for higher returns. If your saving account balance drops below a certain level, say due to an upcoming EMI payment, the facility automatically transfer money from your linked FD to your saving account. This provides both the security of immediate funds and the growth potential of higher FD interest rates.
  2. Flexibility of linking multiple accounts
    You can choose the term, maturity date, and the minimum amount you want to keep in your savings account. Some banks even allow you to link multiple savings accounts to the FD. This means you will always have access to funds when you need them, without sacrificing earning potential.
  3. Helps to build a separate corpus
    The auto sweep facility can help you build a financial safety net. The extra funds moved into the FD steadily grow, creating a separate source of money specifically for those unexpected expenses. This way, you can avoid taking loans when a sudden need arises.

How to get an auto sweep facility

Many banks in India offer this feature. Here is what you need to do:

  1. Existing FD: If you already have a fixed deposit, check with your bank if they offer auto sweep facility and read the terms and conditions before taking any decision.
  2. Open both accounts: If you do not have an FD, you will need to open one along with your savings account. Some banks may let you link to an existing FD, while others might require you to open a new one with them.
  3. Set up the sweep: Your bank will guide you through setting up the auto sweep, including choosing your savings account limit.

Additional notes

  • Some banks call their auto sweep by different names, like “Auto-FD” or "Money Multiplier”.
  • The interest rate on your auto-linked FD might be slightly lower than a standard FD since it offers more flexibility.

Conclusion

An auto sweep facility is a valuable mechanism for anyone aiming to boost their savings potential. If you want to make the most of your money with both flexibility and better returns, ask your bank about this feature. It is an easy and effective way to take your financial management to the next level.

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.