How To Maximize Your Idle Cash
Do you have idle cash in your bank’s saving account? If yes, then the fact is you are losing a lot of money which you could’ve earned if you would’ve invested it somewhere. But that would mean, you have to research where to invest that money. Should you open a fixed deposit, or opening a mutual fund is a better alternative? More the time taken to decide means more you lose potential income.
While you can take all the time you want in deciding where to invest your idle cash, why not take the advantage of your bank’s own Auto-Sweep facility? This is an excellent way to ensure that you do not lose potential income for the time being. And with busy schedules that we all have, Auto-Sweep accounts are convenient too, because you do not have to run and open accounts every time.
Let’s take a look at the features of Auto-Sweep accounts:
- Auto-Sweep accounts are Savings account and Fixed Deposit accounts, rolled into one.
- The money in the Fixed Deposit account earns the rates that of a Fixed Deposit, which is higher than the Saving account’s rates.
- If at any time there is a shortfall in your Savings account, money is withdrawn from your Fixed Deposit in units of Rs.1/-, thus ensuring liquidity, while the balance amount continues to earn higher interest.
- Sweep-In is done automatically by a threshold limit specified by you. For example if you have a threshold limit of Rs.25000/-, it means any money over and above Rs.25000/- will be converted into a Fixed Deposit.
We can now understand the advantages of such Auto-Sweep accounts. However, like with all other investments, there are a few disadvantages of such accounts. Let’s take a look at them now:
- Banks may charge a penalty if the Fixed Deposits created under Auto-Sweep is broken before maturity.
- Some banks do not offer Compound Interest for Auto-Sweeps and offer only Simple Interest.
- This will be only suitable for those Savings accounts where there are very few transactions or withdrawals done on a yearly basis.
I should also mention here that different banks call this facility by different names. Let’s take a look at a few of them here:
- Axis Bank – Encash 24
- Union Bank – Union Flexi Deposit
- HDFC Bank – Super Saver Facility
- Bank of India – BOI Savings Plus Scheme
- Oriental Bank of Commerce – Flexi Fixed Deposit Scheme
- State Bank of India – Multi Option Deposit Scheme
- Allahabad Bank – Flexi-fix Deposit
- Bank of Maharashtra – Mixie Deposit Scheme
- Corporation Bank – Money Flex
- United Bank of India – United Bonanza Savings Scheme
- IDBI Bank – Sweep-in Savings Account
In order to maximize our returns from idle cash sitting in our bank’s savings account, you should first calculate your monthly expenses, the liquid money that you would need every month and multiply that by 3 and set it as your threshold limit, which is roughly the amount you would need for the next 3 months. Now enjoy earning a higher interest on the balance amount, without worrying too much about investing your idle cash. But please do not think that Auto-Sweeps are the only savings avenue for you. So, continue investing in other beneficial schemes from time to time.
Have you enabled Auto-Sweep in your savings account yet? Please write in your comments as to what you think about it.
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