Kotak Mahindra Bank has launched its ActivMoney auto sweep account, offering customers the opportunity to earn interest comparable to fixed deposits (FDs) of up to 7% annually while enjoying the flexibility to withdraw funds from their connected savings account as needed.
This feature, already provided by Axis Bank, HDFC Bank, ICICI Bank, and IndusInd Bank, presents an excellent opportunity for individuals to optimize their savings and maximize their returns.
In this article, we will explore how the auto sweep account works, highlight its benefits, and provide a step-by-step guide on how to use it.
How does the auto sweep feature work?
The auto sweep feature is a way to make the most of the money in your savings account. When your account balance goes above a certain amount, the extra money is automatically moved to a fixed deposit account that offers higher interest rates. This is called "sweeping out." It helps you earn more money on the excess funds.
On the other hand, if your savings account balance falls below a certain limit, the auto sweep feature kicks in again. It's called "sweeping in." In this case, the required amount is taken from the fixed deposit account and returned to your savings account. This ensures that you have enough money in your regular account when you need it.
What are the benefits of an auto sweep facility?
The auto sweep account offers a range of advantages to the users including:
Higher liquidity
One of the primary advantages of the auto sweep facility is the ability to maintain liquidity while earning significant returns. In situations where your current account balance is low, and you have pending payments such as EMIs or checks, the feature automatically transfers the surplus funds back to your account. This ensures that your transactions are not declined due to insufficient funds.
Higher interest rates
Earning a higher rate of interest is a key benefit of the auto sweep facility. By utilizing this feature, customers can earn interest rates comparable to fixed deposits, which are typically more lucrative than regular savings account rates. With Kotak Mahindra Bank's ActivMoney, customers have the potential to earn interest of up to 7% per annum.
Linking multiple deposits
To ensure uninterrupted liquidity, customers can link multiple deposits to their current account for sweep-in purposes. Banks often follow the "Last in, First Out" principle, meaning that the most recent deposit associated with the sweep-in facility will be used to fulfill any sweep-in requirements. This enables efficient management of funds and provides peace of mind regarding cash flow uncertainties.
How to use the ActivMoney auto sweep account?
Here are some simple and easy steps to access the auto sweep feature provided by the bank.
Step 1: Open a savings account with Kotak Mahindra Bank
If you do not have an existing savings account with Kotak Mahindra Bank, visit their website or the nearest branch to open one. Provide the necessary documents and complete the account opening process.
Step 2: Enroll for the ActivMoney auto sweep facility
Once your savings account is active, inquire about the ActivMoney auto sweep facility. Fill out the required application form and submit it to the bank. Ensure you understand the terms and conditions, including the threshold amount for sweeping out and sweeping in.
Step 3: Maintain adequate balance
To take full advantage of the auto sweep account, maintain a balance higher than the predetermined threshold amount. This will ensure that the excess funds are automatically transferred to a fixed deposit, earning higher interest rates.
Step 4: Monitor and utilize funds
Regularly monitor your savings account balance and the fixed deposit associated with the auto sweep facility. Whenever you require additional funds, make withdrawals from your savings account. The auto sweep feature will automatically initiate a sweep-in action to refund the required amount from the fixed deposit.
Step 5: Review and optimize
Periodically review your savings and spending patterns to optimize the usage of the auto sweep facility. Consider adjusting the threshold amount based on your financial goals and requirements. Additionally, stay informed about any changes or updates to the auto sweep facility provided by the bank.
