Updated on July 18, 2023
A Sweep Account is a banking product that combines the features of a savings account and a fixed deposit account. It offers account holders the benefit of earning higher interest rates on their excess funds while maintaining liquidity for their day-to-day transactions.
How does the sweep account function?
In a Sweep Account, the account holder sets a minimum threshold or “trigger level” for the funds they want to keep in their savings account. Any amount above this threshold is automatically transferred to a linked fixed deposit account, where it earns a higher interest rate than a regular savings account. The process of transferring the excess funds from the savings account to the fixed deposit account is known as “sweeping.” The funds are typically swept on a daily basis or at predetermined intervals, depending on the bank’s policies and the customer’s preferences.
What are the advantages of Sweep accounts?
Sweep accounts enable account holders to earn higher interest rates on their surplus funds, maximizing their earnings potential.
With sweep accounts, individuals can easily access their funds whenever needed, ensuring liquidity and convenience.
The automated process of fund sweeping in sweep accounts eliminates the hassle of manual transfers and provides efficient management of funds.
Sweep accounts help account holders optimize the use of their funds by earning better returns on idle money that would otherwise sit in a low-interest savings account.
Account holders have the flexibility to customize their sweep accounts by setting their own minimum balance threshold, and aligning the account with their specific financial requirements.