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Every day, at the end of the day if there is surplus money over the specified threshold (sweep out limit, the same would be auto-moved to a fixed deposit of 180 days duration in case of Savings Account (91 days for Current Account). ( 1 year for NRE SA) at the prevailing fixed deposit rate. And, this deposit is auto-linked to the same account from where the funds are moved to provide you with total-liquidity. In case you are falling short of funds in your account the deficit will be withdrawn from your Fixed Deposit so that you can enjoy financial peace of mind and live worry-free. What is more; the fixed deposit thus created does not carry any pre-closure/part closure penalty which is usually 0.5% to 1%; you save on that too.
Illustration:
Let’s say you have a Kotak Edge Savings Account and you opt for the ActivMoney facility.
The default ActivMoney threshold for your savings account is Rs.25, 000.
Now in case your savings account balance is more than the threshold of Rs.25,000 at the end of the day, the excess amount will automatically get transferred in multiples of Rs.5,000* to a 180 day FD. You will then earn the prevailing FD rate on the balance that has been transferred to the FD. As this FD is linked to your savings account, you can access the funds whenever you wish to, with no penalty charges.
In case you are falling short of funds in your savings account, you need not worry as the deficit will be withdrawn from your FD automatically
While there is nil penalty on premature withdrawal as contracted tenor of FD is 180 days, very early premature withdrawal like 45 days or before at times may result in interest earnings on FD lower than savings bank account interest
Summary of account balance at the end of the day |
||||
Savings/ Current Account balance |
Fixed deposit balance |
Total Available balance |
||
Day1
|
You have a balance of Rs.1 lakh in your account with the defined threshold (minimum amount to stay in your Savings account) of Rs.25, 000. At the end of the day, Rs. 75,000 is moved to an auto-created fixed deposit of 180 days at the prevailing rate. |
Opening balance 1,00,000
End of the day 25,000 |
0
75,000-Dep1 |
1,00,000
1,00,000 |
Day 2 |
Credited another Rs.25,000 in account |
Opening Balance 25,000
End of day Balance 25, 000 |
75,000 – Dep1 25,000 -Dep2 |
1,25,000 |
Day 17 |
Cheque for Rs.40,000 presented in clearing |
Opening Balance 25,000
End of day Balance 25,000 |
60,000-Dep1* Dep2-liquidated* |
85,000 |
*FDs will be created and broken in multiples of ₹5,000 for new ActivMoney registrations w.e.f 5th July’23. For ActivMoney registrations before 5th July'23, Fds will continue to be made and broken in multiples of Rs 10,000
**Liquidated Dep2 for Rs. 25, 000 and liquidated in part for Rs.15, 000 from Dep1 to honour the cheque of Rs.40, 000 as breaking of FD is done in multiples of Rs.5, 000. Dep2 will earn interest for 15 days at the applicable rate without penalty (on LIFO basis) as it exceeds 7 days which is minimum period required to be eligible for interest and Rs.10000 liquidated from Dep1 would earn eligible interest for 16 days. In the above scenario, due to early premature withdrawal, the interest earned on Dep 1 & Dep 2 at times would be lower than savings interest
FDs will be created and broken in multiples of ₹5,000 for new ActivMoney registrations w.e.f 5th July’23. For ActivMoney registrations before 5th July'23, Fds will continue to be made in 10,000 but will be broken in multiples of Rs 5,000
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