Thread by @FincademyIn

How to get 8% interest on savings account and current account ?

A Thread 🧵👇

1/ Firstly, let’s understand what’s the meaning of savings and current account.

Savings account is a deposit account which allows limited transactions and is mainly suitable for people who are salaried employees or have a monthly income.

2/ Current account is mainly used for daily transactions and suitable for traders or entrepreneurs. There is no transaction limit.

3/ If you’re wondering how to get 8% interest on savings/ current account.

Well, there is a facility called auto-sweep facility which allows you to get FD returns on your savings or current account.

4/ The auto-sweep facility is the combined features of savings account and fixed deposit account. It covers the advantages of both the accounts.

5/ How does an auto-sweep facility work?

With the auto-sweep account, your savings account is directly linked with the fixed deposit account and the upper limit is pre-defined.

6/ Whenever the amount in your savings account crosses that upper limit, the excess amount will automatically transfer to the fixed deposit. This way, your savings account gets a higher return.

7/ However, you can change the upper limit for your savings account which is called threshold limit. Whenever the balance is higher than your threshold limit, the surplus amount will be transferred to the FD account. The technical term used for this process is called "sweep-in".

8/ Here comes the advantage of auto-sweep facility. Whenever the amount is transferred to the FD, it doesn’t mean that the amount will lose liquidity.

9/ But, whenever you require the money from your savings account that is in excess of the threshold limit, the required amount will be transferred back to your savings account. This is called “reverse-sweep”.

10/ For your better understanding, let's take the help of an example.

You have opened a savings account with an auto-sweep facility and the minimum balance required for the savings account is ₹5k and threshold limit is ₹10k.

11/ You have deposited ₹50k in your savings account and the excess ₹40k will automatically transferred to your FD. Both accounts will earn their respective interest rates ie, ₹10k will get savings account return and ₹40k will get FD return.

12/ You need ₹45k for emergency purpose, in this case, you can withdraw the full amount in single click and there will be no charges deducted.

If you have withdraw the money before maturity period ends, some charges will be deducted and penalty is pre-defined.

13/ Few things you should keep in mind while opting for the auto-sweep facility.

(a) Some banks say that if you want to again opt for auto-sweep facility, you have to maintain the minimum tranche amount.

14/ For example, the tranche amount is ₹10k and you have ₹8k in your bank account. To avail the auto-sweep facility, you need extra ₹2k for automatically transferring the amount into FD.

15/ (b) Some banks give the minimum FD maturity period which means if you’re opting for a sweep facility, you have to keep the amount for at least (xx) days in your account to get higher return. The days are pre-defined.

16/ (c) The sweep facility is not provided to all the bank customers, it’s because the criteria vary from bank to bank.
But, you can insist the managers to avail the facility for yourself or you can check online whether you are eligible for the facility or not.

17/ (d) Some banks may also give a simple interest rate on the FD created through this facility instead of the compound interest rate.

18/ (e) You need to pay the penalty if you have withdrawn the money before pre-mature period ends.

(f) Some banks may charge fees for availing the auto-sweep facility.

19/ Who should consider opting for auto-sweep facility?

The auto-sweep facility is helpful if you have extra cash in your savings account.

If there is less likelihood of having extra money, then this facility won’t be very helpful for you.

20/ The facility is for people who make only a few withdrawals every month.

If you make several withdrawals in a month, the auto-sweep facility may not be for you.

21/ Auto-sweep is an easy and automatic way to earn a higher interest rate than your savings account.

However, you need to calculate whether taking the facility will enhance your finances or not.

Written by @ShubhamAggarwl

22/ That’s it, hope you like the thread.

We have launched our Basics of Stock Market series on our YouTube channel, consider checking it. Also, we will be launching our next series on Mutual Fund soon, so stay tuned.

Checkout → youtube.com/c/Fincademy