What is Auto Sweep Facility? How it Works and Benefits

Ever wished your savings could do more than sit in your bank, accumulating dust? Imagine a financial tool that safeguards your funds and transforms them into active contributors. Here comes 'auto-sweep facility' – a simple yet powerful mechanism for your savings account.

This blog will discuss auto-sweep meaning, where your money is not just stored; it's strategically at work, ensuring every penny counts. Let’s get started.

What is Auto Sweep Facility?

The auto-sweep facility combines a savings account and an FD or fixed deposit account. It carries with it the advantage of both facilities. With an auto-sweep account, your savings account is linked to a fixed-deposit account and a monetary limit is defined. Whenever the amount in the savings account crosses that defined limit, the excess money is transferred automatically into the fixed deposit. This way, your savings account balance can earn a higher interest rate than it would have lying in a plain-vanilla savings account.

How Does Auto Sweep Facility Work?

The auto-sweep facility is a smart way to maximise your savings. When your account balance goes above a certain amount, the extra money is automatically moved to a fixed deposit account with higher interest rates – this is called "sweeping out." It helps you earn more on the surplus funds.

Conversely, if your savings account balance dips below a specific limit, the auto sweep feature kicks in again, known as "sweeping in." In this case, the needed amount is taken from the fixed deposit account and returned to your savings account, ensuring you always have enough in your regular account when needed.

For example, you have a savings account with an auto-sweep feature in the bank and a minimum required balance of Rs. 5,000. Depositing Rs. 30,000 and setting a threshold of Rs. 10,000 results in Rs. 20,000 being transferred to an FD. Both accounts earn interest at their rates.

Key Highlights:

When you need funds exceeding the threshold, the 'reverse sweep' brings the required amount back to your online savings account from the FD.
The auto-sweep facility provides the flexibility of a savings account coupled with the lucrative interest rate of a fixed-deposit account.
It caters to salaried individuals seeking to avoid significant FD commitments.
It's an effective way to keep earning interest on surplus funds without locking them into rigid financial instruments.

How to Activate Auto Sweep in Your Kotak Bank

Kotak Bank provides ActivMoney savings accounts specially designed to give you the advantages of the auto sweep feature. To activate the ActivMoney or sweep-in feature in your Kotak Bank account, follow these steps:

Visit your nearest Kotak Bank branch or contact the Customer Experience Center.
Alternatively, seek assistance through the helpline to initiate the activation process.
Customers can also use the Mobile Banking facility to raise a Service Request for enabling ActivMoney.
Customers can also sign-up via the WhatsApp sign-up facility for ActivMoney.

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Benefits of Auto-Sweep With Kotak Bank

Higher Interest Earnings

By transferring excess money to an FD account, you can enjoy a higher interest rate, often more competitive than traditional savings accounts. Check the FD rate before opening your bank account to make the most of this.

Zero Penalty on Withdrawals

Unlike regular FDs, the Kotak ActivMoney savings account has a zero lock-in period. It means you can access funds swept into the FD from your savings account whenever needed without facing any penalties.

Flexibility

This feature automatically converts surplus savings into FD without manual intervention. Moreover, these funds have no lock-in, allowing you to access them whenever needed.

Enhanced Wealth Management

This facility is particularly beneficial for those who maintain a significant balance in their savings account but only require instant access to some parked funds. It streamlines wealth management by offering a balance between accessibility and higher returns.

Frequently Asked Questions

What is the purpose of having an auto-sweep account?

An auto sweep account maximises your savings by automatically transferring excess funds into a fixed deposit, earning a higher interest rate. It balances liquidity and growth, ensuring your money works smarter.

Is there a minimum balance requirement for auto-sweep accounts?

Yes, there is usually a minimum balance requirement for auto-sweep accounts. Ensure you are aware of and maintain this minimum to enjoy the benefits of the facility.

Are there any charges associated with the auto-sweep facility?

No, Kotak does not impose additional charges for the auto sweep facility. It is generally a complimentary service to enhance your savings efficiency.

Can I deactivate the auto-sweep feature if needed?

Yes, you can deactivate the auto sweep feature if needed. Contact your bank's customer support or visit a branch to make any adjustments to your account preferences.

Can I have multiple auto-sweep accounts with different parameters?

You can have multiple auto-sweep accounts with different parameters, providing flexibility in managing various savings goals.

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Conclusion

An auto-sweep account offers a smart financial approach, seamlessly merging liquidity and higher interest through automatic transfers to fixed deposits. With no lock-in penalties and flexible fund access, it's an optimal choice for managing wealth effectively. Make your money work smarter and explore your financial potential with auto-sweep.

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