Automatic Sweep Facility: Everything You Need To Know

  • Published on: 4 Dec 2023
Automatic Sweep Facility: Everything You Need To Know

Most banks now offer an automatic sweep facility with their savings accounts, which has become popular amongst account holders. While regular savings accounts offer interest, it is often below the inflation rates. 

However, the auto sweep account interest rate is higher than the savings account rates, allowing you to earn higher returns. It also enables you to practise disciplined investing, all through your idle funds. 

To learn the auto sweep meaning with respect to a savings account, how it works and its benefits, read on.   

What is an Auto Sweep Facility?

An auto sweep account is a combination of a savings account and a fixed deposit (FD), allowing you to enjoy the benefits offered by both. Under the automatic sweep facility, your savings account is linked with your FD account. 

By opting for this facility, you instruct the bank to transfer funds in excess of a pre-determined limit into an FD account. This allows you to earn a better interest on the extra funds than a regular savings account. 

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How Does the Automatic Sweep Facility Work?

In addition to understanding what is an auto sweep facility, knowing how this facility works is crucial for making an informed decision. To begin with, when you opt for an auto-sweep account, the bank will ask you to specify a threshold limit. 

Whenever your account balance crosses this threshold limit, the excess amount will be automatically transferred into a fixed account. This process is known as sweep-in and the interest you will earn on this will be different, generally higher, than the savings account.

Opting for the facility of auto sweep in a savings account doesn’t mean that you can’t access the amount converted into an FD. You enjoy the same level of liquidity as with a regular savings account. 

As such, if you request an amount in excess of the limit, the bank will transfer the same from the FD created through the sweep-in facility.

Pros and Cons of the Auto Sweep Facility

Here are some of the benefits of availing of the facility of auto sweep in a savings account:

  • An auto sweep savings account allows you to earn higher returns compared to the regular savings account while enabling you to enjoy the same ease of access to funds 
  • This type of account also offers flexibility to choose the threshold amount as well as the tenure and maturity period of the fixed deposit

On the other hand, opting for this facility also has certain disadvantages. These include:

  • Some banks levy additional charges if you opt for this facility
  • You need to pay penalty charges if you make a premature withdrawal from your FD account

The money lying in an auto sweep account helps you create a corpus for emergency expenses or long-term goals. However, if you ever fall short on cash for your lifestyle needs, you can also rely on Fibe’s quick and hassle-free Instant Personal Loan

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FAQs on Automatic Sweep Facility

Is auto sweep good or bad?

The auto sweep in a savings account is ideal if you often have a large balance in your account that you don’t need to access frequently. 

What is the minimum balance for an auto-sweep account?

The minimum balance when you opt for the facility of auto sweep in a savings account will depend on the bank and your account type. 

Which is better, FD or auto sweep?

For individuals who have a huge lump-sum amount to invest for a fixed tenure, a regular FD is the better option for investment. However, the automatic sweep facility is better for those who regularly have a high balance and want to retain the liquidity of a savings account. 

Can I withdraw money from the auto-sweep account?

Yes, an auto sweep account offers the same level of liquidity as a regular savings account, which means you can easily withdraw the excess money whenever you need.

Do sweep accounts pay interest?

Yes, the automatic sweep facility offers interest on the savings account as well as the FD account created after the sweep-in. Moreover, the auto sweep account interest rate is generally higher than that of a regular savings account.

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