Everyone strives to get higher returns on their money. But money lying in the savings account can hardly help you to build wealth. Many savings accounts give interest rate less than 4% per annum while few banks like Kotak Mahindra Bank give interest rate of up to 6%. While the interest rate may be attractive in few savings account, fixed deposits give higher interest rates than savings bank account.
One of the easiest ways is to make sure that you get higher interest on your savings is to opt for automatic transfers from savings account to fixed deposits. Fixed Deposits are also known as Term Deposits or Time Deposits. Here, the investment is locked in for a certain period of time. Typically, FDs maturing within 1 to 5 years are popular among customers. The interest rate and tenure are some of the few factors that need to be checked before opening a fixed deposit.
While you may want to open fixed deposits, you have not been able to do so as money in savings account rarely stays there. To help customers, many banks provide facility where any amount beyond the set amount is transferred to a bank account. This helps to make sure that the idle money lying in the savings account continues to fetch earn higher interest.
The automatic transfer from saving account to fixed deposit are known by various names such as flexi deposit, auto sweep facility, sweep in and sweep out etc. Different banks call it by different names.
SBI has a separate savings account called savings plus account which is linked to multi option deposit scheme (MODS). In this account, the surplus fund above a threshold limit is automatically transferred from the savings account to a fixed deposit account. The account can be opened by any individual. The account holder also has to keep a minimum average balance. The average minimum balance can varies between Rs.1,000 to Rs.3,000 depending the area of the branch.
In order for your money to be transferred to a fixed deposit, the minimum threshold limit is Rs.35,000. This means that if your savings account exceed Rs.35,000, it will be transferred into an FD. The minimum amount of transfer will be Rs.10,000 and in multiplies of Rs.1,000.
These fixed deposits can be used if you want money for any purpose. It will also be used to fund the minimum balance requirements if your bank account falls below the average minimum balance. However, if sufficient balance is not available in the MOD, then the customer has to pay charges due to the non-maintenance of the balance.
There are two ways to transfer the money from the fixed deposits to savings account. SBI gives you the option to select ‘First in First Out’ or ‘Last in First out’ principle for breaking the deposits. If there is no mandate, then the default mandate will be ‘Last in First out’ principle. In ‘First in First Out’, the first FD is broken to fund the savings account and in ‘Last in First out’ the first FD is used to fund the savings account.
Account holders of this bank account are eligible for all the facilities available to a regular savings bank account customer such as ATM card, net banking, and SMS banking etc. Also, loan against MOD deposits is also available.Tags: savings account, savings bank account, fixed deposit, FD
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