An interest-bearing deposit account held at a bank or other financial institutions is known as a savings account. These types of accounts pay a modest interest rate, safety, and reliability, a great option for storing cash you want available for short term needs. Up to certain limits, money in a savings account is insured by the Federal Deposit Insurance Corporation (FDIC). Money in a savings account cannot be withdrawn through an ATM or check-writing. For savings account interest rates are low.
But while keeping money in bank accounts, we should ensure liquidity in times of contingencies or should take care of your daily expenses. You should ask the Banks about Sweep-out and Sweep in facilities to earn on your savings bank account. Usually, all the banks offer special savings accounts with a facility of automatic sweep out, where surplus funds are put in a fixed deposit. The fixed deposits will automatically dissolve to meet the shortfall when you need the money or your bank account starts running low on funds. By these, your money never lies idle in a bank account. Through a higher rate of interest, a linked fixed deposit ensures higher earnings against regular savings bank interest rates.
One of the best parts of this facility is that you don’t have to track your idle funds regularly and you don’t have to give instructions to the bank to create term deposits out of your savings account. It all will happen automatically. At the time of availing these facility ones, you have to give instructions to the bank. You should decide to thresh hold to define the surplus fund in your account. While some cases between 10000 and up to 1 lakh the bank will have a fixed thresh hold. The Bank creates Fixed Deposits for the surplus amount once your account balance hits the thresh hold. The tenure of the Fixed Deposit depends on the bank that can be between 1year to 5 years. When the FD matures it is auto-renewed by the bank. Like special accounts for women and kids etc, this facility can be clubbed with other bank accounts.
For the savings account offering this sweep out facility, every bank has a different name for eg, SBI calls it as ‘Savings Plus Account’, HDFC bank calls it as ‘HDFC Banks Money Maximize’, Bank of Baroda named it as ‘Edge Savings Account’. The taxation is as per the slab rate applicable to the interest earned on a bank FD. Thus it will not benefit taxpayers falling in the highest tax bracket. Under Sec 80 TTA of Income Tax interest earned up to Rs.10000 in a savings account can be claimed as a deduction.
