It doesn't matter that how much you are earning. But it is very important to keep a certain amount of your income for savings. Weather you earn more or you earn less, you should do your best to save for unexpected expenses. But have you ever figure out that "how" and "where" you shall put your savings. Of-course in bank saving account, but have you chosen a certain bank where you shall open saving account you want to have or you already have saving account in some bank.
Today we discuss how to earn extra money from the cash lying in the saving account of your bank.
Generally any bank as per the guidelines of RBI ( Reserve Bank of India ) gives you only the 3 to 4% of interest on your savings, but if you enables the "Auto sweep" facility than you can earn upto 8% of interest on your savings same as bank FDs.
What is Auto Sweep Account.
"Auto Sweep" is a facility which provides, the combined benefits of a Saving Bank account and Fixed deposits. Auto sweep facility interlink your saving account with a deposit account and make sure any extra amount lying in your saving bank account above a threshold limit is automatically transferred to fixed deposits and you earn better interest on your saving money.
How Auto Sweep works.
* You decided the maximum amount that you want in your account. This is called threshold limit.
* You decide the amount on which the FD needs to be created.
* You decided the tenure of these FDs
Let's take an example,
The threshold limit of Rs 10,000 for which the FDs need to be created of Rs 5000 and the tenure of the FDs is 6 months,
Suppose Mr Deepak have the balance in their account is Rs 12,000 and he deposit his salary of Rs 17,000 in the saving account,
Now the total balance becomes Rs 12,000 + Rs 17,000 = Rs 29,000.
At this time when the amount balance of Deepak is above Rs 15,000, (Rs 10,000 threshold limit & Rs 5000 per FD), the bank's computer automatically create 3 FDs of Rs 5000 each.
Thus, Mr Deepak have 3 FDs of Rs 5000 each and balance amount of Rs 14,000.
Now, if Deepak withdraw Rs 3000 for household expenses from ATM and the account balance reduce to Rs 11,000 + 3 FDs of Rs 5000 each.
Then Deepak also write a cheque of Rs 2000 to pay his car EMI, as soon as this cheque clears the account balance reduces to Rs 9000, which is below the threshold limit of Rs 10,000.
Then, the bank's computer automatically breaks 1 FD of Rs 5000 and deposit that amount in your account.
Thus, now Deepak have in their account Rs 9000 + Rs 5000 ( 1 FD broke ) = Rs 14,000 and 2 FDs of Rs 5000 each.
Interest rate :
The interest rate offered on these auto sweep FDs is the same as rate offered on regular FDs of that duration. It means you can earn returns in the range of 8% to 9%.
The auto sweep facility is offered at no extra cost by most bank. You can operate the account exactly like a regular bank account. If the amount you want to withdraw through ATM or cheque is more than the threshold limit than one of the FD would be broken immidately ( all this happen automatically ).
And the best thing offered by most bank is that, most bank follow the FILO ( First In Last Out ) approach for breaking the FDs. Thus, if an FD has to be broken to provide for a withdrwal, the most recent FD is broken first and there is no penality for breaking these FDs.
Almost all the modern banks offer this facility but it can be called by different names like
* HDFC Bank - Super saver facility
* IDBI Bank - Sweep in saving account
* Axis Bank - Encash 24
* Union Bank - Union flexi deposit
* State Bank of India - Multi option Deposit scheme
* Bank of India - BOI Saving Plus Scheme
* Oriental Bank of Commerce - Flexi Fixed Deposit Scheme
* Allahabad Bank - Flexi Fix Deposit
* Corporation Bank - Money Flex
* Bank of Maharashtra - Mixie Deposit Scheme
* United Bank of India - United Bonanza Saving Scheme.
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