Is It Wise to Keep Large Sums in a Savings Account? Find Out Where You Can Earn Better Returns

Sweep-in FD: Are you leaving excess funds sitting in your savings account? Discover how a Sweep-in FD can boost your earnings by generating higher interest on your savings.

Sweep-in FD: People often let their hard-earned money sit idle in their savings accounts. The reason is clear: the money can be withdrawn at any time, and it feels secure. However, have you ever stopped to consider whether that excess money sitting there is actually generating a worthwhile return? The truth is that most banks in India offer an annual interest rate of only around 2.5% on savings accounts. Consequently, if a large sum remains parked there for an extended period, the financial benefit derived from it is minimal.

How Much Money Should You Keep in a Savings Account?

Financial experts suggest keeping only as much money in a savings account as is required to cover your expenses for 3 to 6 months. Additionally, a small emergency buffer can be maintained. This ensures that funds are immediately accessible whenever a need arises. However, if a sum exceeding this amount is sitting in the account, leaving it there is generally not considered a prudent financial move. Doing so simply leaves your money lying dormant while yielding very low returns.

What Is a Better Alternative for Excess Funds?

If you want your money to remain secure while also being instantly accessible whenever needed, a bank's "Sweep-in Fixed Deposit" can be an excellent option. Under this facility, your savings account is linked to a Fixed Deposit (FD). You set a specific threshold limit; as soon as the balance in your account exceeds this predetermined limit, the surplus amount is automatically transferred into the FD. This allows that specific sum to earn a higher interest rate—significantly more than what a standard savings account offers—while remaining easily accessible for use whenever required.

How Can You Access the Money When Needed?

The greatest advantage of a Sweep-in FD is its liquidity. If your savings account balance drops below the set threshold, the bank automatically breaks a portion of the linked FD and transfers the funds back into your savings account. Many banks do not even levy any additional charges for such premature withdrawal of the FD under this facility.

How Much of a Difference Can It Make?

Suppose you have ₹2 lakh in your account. If this amount remains in a savings account, it will earn approximately ₹6,000 in interest over the course of a year. However, if this same amount is transferred to a Sweep-in FD, it could earn up to around ₹16,000. That represents a benefit of roughly two and a half times more.