Fixed deposits i.e. FDs are the traditional attraction for investors. In recent years, banks have tried to make it more convenient and profitable. Banks have now begun offering FD Sweep-in against the amount deposited in a savings account. There is an overdraft on FD. Financial advisers say investing only works when it comes to your protection in a difficult time. FD Sweep-In and FD Overdraft are good options for this scale.
What is FD Sweep-In
When the amount deposited in a savings account exceeds a certain threshold, banks offer the FD Sweep option on it. Customers have the right to set limits. If you have more than one lakh rupees in your savings account, you can ask the bank to convert more than 25 thousand rupees into an FD sweep. It earns more interest than a savings account. Even after this facility, you will have no problem withdrawing more than Rs. Also, if someone gives a check for more than Rs 25,000, then there is no problem in cashing it out.
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What is FD overdraft
Banks offer overdraft facility against FD. In most cases, banks offer up to 80 percent of FD overdrafts. Banks charge one to two percent interest on it. If you are getting 6 per cent interest on FD, banks charge 7 or 8 per cent interest on overdraft. By having an overdraft facility, you don’t need to break the FD.
Why FD Overdraft Is Better
In FD overdraft, banks charge interest every day. If your work is done within 15 days, the bank will only charge you interest for 15 days. Other loan options charge interest on a monthly or quarterly basis. Other than this, there is no prepayment fee on overdraft.