Is It Possible To Establish an Emergency Fund Using a Sweep Fixed Deposit?

Nowadays, fixed deposit schemes come with a variety of facilities that allow account holders to maximise their returns and increase the liquidity of the assets held within these tools. The auto sweep-in feature is one such perk offered by multiple FD providers in India. It aids you in automatically moving the excess assets in your bank account into a high-interest fixed deposit. You can then use the returns awarded by this instrument to effectively build an emergency fund for yourself and your loved ones. Intrigued? Read through this article to know more about sweep-in fixed deposits and determine whether these instruments can aid you in realising your long-term financial goals.

What are Sweep-In FDs?

As mentioned above, fixed deposit plans offering a sweep-in facility allow you to move your idle funds into an FD, thereby making you eligible to reap greater returns. For these instruments, the tenor usually falls between 1 to 5 years, depending on your respective bank/NBFC. To know more about the unique plan details, like, say, the sbi fd rate of interest, you can visit the official website of the financial institution in question.

As an account holder, you can control the amount of funds held in your current and savings accounts.Hence, any surplus inflow of funds will be automatically redirected into your sweep-in fixed deposit. Along with maximising your returns, this feature helps you build of a viable safety net to lean onto, in case a financial misfortune strikes unannounced.

Features of a Sweep-in FD

• • Account linkage: The auto sweep-in facility helps you transfer funds from your savings/current account to an FD, provided the financial institution offering the services remains the same. To facilitate the same, your bank/NBFC will ask you to link your primary account to a fixed deposit plan
  • Tenor: Sweep-in FDs usually come with a tenor of 1 to 5 years, depending on the provider
  • Minimal funds required: You don’t need to have a large surplus of funds, in order to reap the benefits offered by a sweep-in FD. Typically, your provider will move the excess money in multiples of ₹1,000. Moreover, some banks/NBFCs also support the transfer of amounts ranging between ₹1 to ₹1,000

• Higher rates of interest: When compared to a basic savings or current account, the interest offerings of sweep-in FDs are much higher, entitling you to reap more returns

• Eligibility criteria: In most cases, these unique fixed deposits require you to initially park a minimum of ₹25,000 into the FD, to be eligible for the automatic sweep-in service
• No penalties: Sweep-in fixed deposits allow you to withdraw funds without any penalties or additional charges, if you find yourself stuck in a financial crunch. This is because, the instrument allows you to make the withdrawals by tapping into the swept-in assets of the FD, leaving the actual interest component untouched.

How To Sign Up for the Sweep-In FD Facility?

As an eligible account holder, you can apply for a sweep-in fixed deposit scheme by getting touch with your bank/NBFC using an online or offline mode.

If you’re someone who doesn’t want to go through the hassle of visiting your provider’s branch office, you can sign up for a sweep-in FD by visiting the financial institution’s official website. Then, you’ll be required to link your preexisting current or savings account with an FD account. After that, you’ll have to fix a bank account limit and the time period for which you want the sweep-in facility to stay active. Most banks/NBFCs offer a portfolio of fixed tenors for such instruments, which you can pick and choose from, to best suit your unique circumstances and goals.

Sweep-In Fixed Deposits: Advantages 

• Higher Interest Rates 

When your idle funds are sitting in a sweep-in FD, they garner more interest than what was initially being accrued through your savings/current account. The rates of interest offered by these tools are very similar to that awarded by regular fixed deposits, typically ranging between 3.00% to 9.50% per annum. 

• More liquidity

Sweep-in fixed deposits help you enjoy the best of both worlds. With these instruments, you have the liberty of withdrawing funds at will, paired with the higher interest rates offered by an FD. 

• Multiple account linking

You can link several fixed deposit accounts with your savings account, thereby boosting the former’s liquidity to be considerably greater. 

• Control over assets

Most FD providers allow you to determine the tool’s tenor, its period of deposit, and the payment schedule. Moreover, you have the final word on how much of a balance needs to be maintained, in your savings or current account. 

• No additional fees 

Signing up for a sweep-in FD doesn’t transalate to imply additional fees whatsoever, unlike the case of an overdraft facility, which usually comes with supplementary charges. What’s more, when you withdraw a portion of your money prermaturely, you’ll not be liable to pay a penalty, either.

The abovementioned perks can effectively help you establish a large corpus over the years, which can, in turn, act as a viable emergency fund, helping you sail through trying circumstances with great ease,certainty, and stability.