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

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
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