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What Is Sweep-In Fixed Deposit? How Does It Help In Creating An Emergency Fund? GenZ And Millennials Should Know
In times of massive lay offs all around the industry, an emergency fund can offer you the much needed financial cushion. This fund will provide mental security for both you and your dependents. Among several financial instruments of building an emergency fund, Sweep-In FDs are one. Let's understand it in details.
Emergency Funds In Times Of Job Loss
With big financial job loss shocks jolting several employees frequently, experts advise creating an emergency fund that will provide a buffer to deal with emergencies like sudden medical expenses, education fees, rent payments, and others.
Instruments Of Emergency Fund
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An emergency fund can be helpful if you lack job security, you're self-employed or have dependents. While there are plenty of investment options available, fixed deposits and mutual funds are two options you can invest in. Sweep-In FD is one of the many types of Fixed Deposits available that you can invest in. According to experts, Sweep-In FDs are good options as they allow account holders to enjoy the high interest rates of a fixed deposit while maintaining liquidity in their savings account.
What Is Sweep-In FD?
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In case of a financial emergency, a Sweep-In FD helps the account holder to use funds from their FD account without breaking the FD. With the Sweep-In facility, you can link one or more savings or current accounts to the FD Account. A Sweep-in facility ensures that whenever funds in your savings account are running low for a transaction, the bank will automatically transfer the deficit amount from your Fixed Deposit to your Savings Account.
Sweep-In FD Threshold
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The Sweep-In FD facilities also ensures that any funds exceeding the minimum threshold in the savings account are automatically 'swept' into the fixed deposit. The funds also get transferred back to the savings account if it falls below the minimum threshold.
Sweep-In FD No Additional Costs
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Customers can better handle financial emergencies with a Sweep-In FD since they don't have to worry about additional costs like overdraft fees or bounced cheque penalties.
Sweep-In FD Withdraw Required Amount
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The Sweep-In facility ensures that customers can withdraw the required amount without having to break their FD accounts in case of a financial emergency.
Sweep-In FD Generate Higher Interest
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When the sweep-in funds get transferred to the FD, the customer would earn the applicable interest rate on it. This interest rate is usually higher than the savings account rate.
Sweep-In FD Interest Deducted Only On Amounts Withdrawn
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In auto sweep FDs, you don't lose interest on the entire deposit amount if you withdraw early. Sweep-In FDs deduct interest only on amounts withdrawn and not the total principal.
Sweep-In FD Liquidity Maintained
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If the savings account balance drops below the threshold, funds are automatically moved back from the FD to the savings account to make up the difference. This feature maintains liquidity and ensures you have sufficient funds.
Sweep-In FD No Penalties
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The auto sweep FD gives you the freedom of easy access to your money, as you can make a partial or full withdrawal without incurring penalties. This means that you can access your money whenever needed, without having to pay penalties.
Sweep-In FD Convenience For Users
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The automatic transfer of funds ensures that you don't have to manually transfer your money to a fixed deposit. This feature saves your time and effort and makes it easier to manage your finances.
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