Sweep-in deposit account gives higher interest than savings account: Will it suit you? 

A sweep-in fixed deposit known by different names like money multiplier, 2-in-1 account, comes with a higher yield (around 6.75% currently) compared to a savings account, at the same time maintains the liquidity of a savings account.
  • Sweep accounts for individual investors are typically used by brokerages to park money waiting to be reinvested such as dividends, incoming cash deposits, and money from sell orders. These funds are typically swept into high interest holding accounts or into money market funds until an investor makes a decision on future investments.
  • They are also are a typical business tool, especially for small businesses that rely on daily cash flow but want to maximize earning potential on sitting cash reserves.
  • For example, if you have Rs. 180,000 in your savings account and the threshold limit is Rs 22,000, then Rs. 158,000 will automatically be moved out and converted into an FD. And, in case you have insufficient funds in your savings account, the deficit will be made good by withdrawals from your FD and funds will be moved back into the savings account.
Sweep accounts are useful if you have money at the end of the month left over after your expenses. Sweep-in FDs or even regular fixed deposits may be used for short-term goals. Not only is the interest rate taxable as per one’s tax slab, real returns are low post-inflation.
Source: http://bit.ly/2A0SXAN

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