If you have a savings account and you want to avail FD interest from that account, then you must read this news once. For this you will have to take advantage of this facility. Here are some important things which will benefit you.
In today’s time, almost every person has a bank account. There are many people who have more than one bank account. These bank accounts are called Savings Bank Account. In these, people keep their money safe, on which they also get 2-3 percent interest from the bank. You must be hearing that the interest is so low, even 6-7 percent interest is available on FD.
Now the question is how to put money in FD, how to withdraw it suddenly when needed? If you also think so, then you can opt for Sweep-in FD. Under this, you will get the benefit of FD in your savings account only. Let us know everything about it.
What is sweep-in-FD?
Sweep-in-FD is an auto-sweep service. Under this, whatever extra money there is in your savings account is transferred to FD. FD linked to savings account is for 1-5 years. Now the question arises that when will the extra money be considered in the account and when will the money be transferred. For this you will first have to set a threshold limit.
Know what is sweep threshold limit
Although the bank itself decides the sweep threshold limit, it also gives the account holder the option to customize it as per the need. This is the limit beyond which money will automatically be transferred to the FD account. In this way, you will start getting FD interest on your savings account only.
Minimum FD amount
In sweep-in-FD, the bank also fixes a minimum FD amount. Unless the amount exceeds the threshold limit, the money will not be transferred. That is, if your threshold limit is Rs 25 thousand and minimum FD amount is Rs 5 thousand, then Rs 5 thousand will be transferred to FD only if there is Rs 30 thousand in the bank account.
Minimum maturity period
A maturity period is also decided by the bank. That means you cannot withdraw FD money before that. Suppose, Rs 5,000 is transferred from your account to FD and the minimum maturity period for you is 15 days, then you cannot withdraw that money before 15 days.
What if withdrawal before maturity period?
If you withdraw the money in FD before the maturity period, then like a normal FD account, you will have to pay a penalty of up to 1 percent. In such a situation, Reverse Sweep works. For this you can choose two types of options.
The first is LIFO i.e. Last In First Out. Meaning, the FD which is made later will break first. The second is FIFO i.e. First In First Out. Meaning, the FD which is made first will break first. However, this will happen only if you suddenly need money before the maturity period.
Who should choose FIFO, for whom is LIFO good?
In such a situation, if you keep the maturity of the FD very short, say 15 days, then you should choose the FIFO option. You will benefit from this that if your FD matures early, there will be no penalty on withdrawing the money. However, a very small FD should be kept only when you know that you have to withdraw money from the account frequently.
This is a profitable deal for those people who get a huge salary on the 1st, but after 15-20 days they have to pay most or almost all the money to pay some bill. In such a situation, by making an FD for 15 days, you will be able to get 6-7 percent interest on your money during that period, whereas if it remained in your savings account, you would have got only 2-3 percent interest.
On the other hand, if you have a lot of money saved every month from your salary, then you can choose the option of long term FD. Also, in such a situation, LIFO option should be chosen for Reverse Sweep.
In such a situation, if you ever need money, your last FD will break first. Only a few days have passed since the last FD was made, so you will be charged less penalty on it and your loss will be less.
