The facility, when enabled, transfers money from your account over a predetermined amount to a deposit that offers you a higher return; this deposit is typically a fixed deposit (FD). This process is called “wiping out”.
New Delhi: With the launch of its ActivMoney facility, Kotak Mahindra Bank now offers customers the chance to earn interest comparable to a fixed deposit (FD) of up to 7% per annum and the flexibility to withdraw from a linked savings account when they but want. Axis Bank, HDFC Bank, ICICI Bank and IndusInd Bank already offer this auto-sweep option, and now Kotak Mahindra Bank has also launched this feature.
How does the Auto Sweep feature work?
When enabled, the auto sweep option transfers money from your account over a predetermined amount to a deposit that offers you a higher return; this deposit is typically a fixed deposit (FD). This process is called “wiping out”.
When the balance on your account falls below the predetermined level, the shortfall is refunded to you and this step is sweep-in.
“An auto-sweep facility is extremely beneficial for consumers who need to maintain large balances in their savings accounts to deal with uncertainties in cash flow,” said Naveen Kukreja, co-founder and CEO of Paisabazaar.com, by MoneyControl.
Benefits of Auto Sweep Facility:
Higher liquidity
Using the sweep option, you can maintain a lot of liquidity while earning a significant return on your investment. If you’re low on money in your checking account and you have an EMI or check due, in this facility your bank will automatically transfer the excess back to your account, and your transaction will not fail.
Higher interest rates
This is the biggest advantage of this facility and the customer can earn a higher rate of interest by using this facility.
Link multiple deposits
To ensure that a liquidity problem never arises, you can link numerous deposits to the checking account for sweep-in. Banks often follow the “Last in, First Out” principle in these circumstances, which means that when a sweep-in is triggered, money will be sent to your account from the most recent deposit associated with the sweep-in facility .