Skip to main content

Bank Flexi Deposit vs Bank Sweep in Facility

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

All of us build our contingency reserves and keep it in our locker or savings bank account for any emergency that may arise in the future. By keeping this money in savings bank account we are able to maintain the required liquidity of funds; but the interest @ 4% p.a. (if your bank is not offering 6% - 7% interest on savings account) that we earn on the money lying in savings bank account may not be sufficient.

It would be better if we are able to maintain the liquidity and at the same time earn a higher rate of interest on our deposits in savings bank account.

If your bank is not offering high interest on savings account, here are the 2 options that can help you earn a higher rate of interest on your money lying idle in your savings account:

1.  Sweep in Facility

2.  Flexi Deposit

Sweep in Facility

In order to enjoy the sweep in facility you need to have a savings bank account. In your savings bank account you can set a threshold limit, above which any amount deposited in your savings bank account will automatically move to a fixed deposit and earn a higher rate of interest prevailing on the fixed deposits for the tenure that it remains with the bank. In case your savings account balance is low enough to clear your issued cheque then also you need not need to worry about it. Any amount of deficit in your savings bank account will be taken care by your fixed deposits.

For e.g. you have set a threshold limit of Rs. 10,000 in your savings bank account and have deposited Rs. 50,000 in the account. Now Rs. 10,000 will remain in your savings bank account and Rs. 40,000 will automatically convert into fixed deposit which will earn you a higher rate of interest of about 8-9% p.a. If you issue Rs. 15,000 cheque towards your credit card payment and your savings bank account has just Rs. 10,000 in the account then the deficit of Rs. 5,000 will be recovered from your fixed deposit.

In the above example you will earn savings bank account interest of 4% on Rs. 10,000 and 8-9% returns on Rs. 40,000 so you have the benefit of enjoying an additional rate of interest of about 4-5% on Rs. 40,000 and at the same time you are also able to maintain the liquidity for any emergency that may arise. If you do not opt for a deposit through sweep in facility thinking it is illiquid or you are ignorant about it, then you would lose out on opportunity to earn an additional 4-5% rate of interest that you could easily earn on your deposit of Rs. 40,000 in this case.

Flexi Deposit

In order to enjoy flexi deposit facility you need to have a savings bank account and also book a fixed deposit with the bank. Your fixed deposit will then be linked to your savings bank account and in case there is insufficient fund to clear your issued cheque; the deficit amount will automatically get transferred from your fixed deposit to your savings bank account.

For e.g. you have Rs. 10,000 in your savings bank account and you also have booked a fixed deposit with the bank of Rs. 1 lakh. Now this Rs. 1 lakh fixed deposit will be linked to your savings bank account and in case of an insufficient balance in your savings bank account, the fund from this fixed deposit will be used. Suppose you issue a cheque of Rs. 25,000 towards payment of credit card bill and your savings bank account has just Rs. 10,000 balance then the deficit of additional Rs. 15,000 will be taken from your linked fixed deposit and your credit card bill will be paid off.

In the above example you will earn savings bank account interest of 4% on Rs. 10,000 and 8-9% returns on Rs. 1,00,000 fixed deposit so you have the benefit of enjoying an additional 4-5% on Rs. 1,00,000 and at the same time you can also maintain the liquidity for any emergency that may arise. If you would not have opted for flexi deposit then the liquidity in your saving account will be maintained, but you would lose out on the additional 4-5% rate of interest that you could have earned on your fixed deposit of Rs. 1,00,000.

What is the basic difference between Sweep in Facility & Flexi Deposit?

In a sweep in facility, any amount above a threshold limit automatically gets converted into fixed deposit and you do not need to book a new fixed deposit with your bank; while in Flexi Deposit you need to manually book a fixed deposit with your bank, which will then be linked to your savings bank account.

Conclusion

Sweep in facility is more convenient way to park your contingency funds as it is automatic while you can go for flexi deposit as well but you need to manually book fixed deposit every time you have some surplus cash and then link it with your savings bank account. Also remember some banks charge penalty of about 1% of interest in case you break your flexi deposit before maturity, but considering the high rate of interest of 8-9% on flexi deposit, the return after 1% penalty charged by bank is still higher than your savings bank account rate of 4%.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...
Read more

Health insurance guide - Part I

Insurance, by definition, is morbid. What if I die suddenly? What if my home caught fire? What if I had to undergo expensive medical treatment? What if something that I thought happened only to others befell me? Insurers, who work with large samples, calculate the probability of such an event and, hence, the possibility of them having to pay out a sum of money to mitigate, to the extent possible, the effects of that disaster. However, the possibility of you undergoing some kind of expensive medical treatment during your lifetime is far more likely than you dying suddenly or your house burning down. Given that costs at private healthcare facilities, where you are most likely to land up, is high, and, doubling every four years 10 months or so, the rest of your money life could easily go out of whack if you had to incur such expenses. Just 12 per cent of India's population is covered with some sort of health insurance. Pared to the bone, for a comparatively small price, health insu...
Read more

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
Read more

10 year NSC launched, all set to give 8.7 per cent

Invest in Mutual Funds Online Download Mutual Fund Application Forms THE government introduced a 10-year National Savings Certificate ( NSC ), which will earn an interest rate of 8.7 per cent per annum. The notification for the launch of the new savings instrument, 10-year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said. The scheme will come into effect from December 1, it added. Investments in NSC will earn interest at the rate of 8.7 per cent compounded semi-annually, it said, adding that on an investment of Rs 100, the depositor will get Rs 234.35 on maturity of the NSC. There is no upper limit for investment in the certificate, it added. The new scheme will give better returns along with tax benefit to savers. At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs 1,00,000 under Section 80C. The decision to raise the maturity period of NSC has been taken on the b...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now