One of the most common types of accounts is a savings account. It keeps your money safe and earns a small amount of interest-around 3.5 percent. A savings account carries high liquidity. You can use the account for your day-to-day transactions like paying bills, EMIs etc.
Fixed deposit is another safe option to park your money. It scores better than a savings account in respect of interest rate, around 8 percent, but does not provide enough liquidity. In an FD, your money is locked for a particular period of time and you cannot have access to it during that period.
How about a facility that combines both the benefit; the liquidity offered in a savings account and the interest rate in case of a fixed deposit? Auto-sweep facility provides you benefits of both.
What is an auto sweep facility?
Auto-sweep facility, also known as flexi-deposit scheme, enables you to fix a pre-determined amount for your savings account the excess of which will be automatically transferred to a fixed deposit.
This fetches you a higher rate of interest on the transferred amount. These FDs are liquid since they are fragmented and operate like normal savings bank accounts. Some banks also allow the transfer of excess money to some mutual fund scheme or money markets.