Saving money is a crucial aspect of financial planning, as it helps to secure your future. However, it’s not enough to just open a savings account and let your money sit there. You need to invest your money wisely to earn higher returns. . But many account holders often have idle funds in savings accounts that do nothing except earn nominal interest that barely beats inflation rates or maintains its value over time. So, what can you do to maximise your returns while maintaining liquidity? This is where an ActivMoney savings account plays an important role.
By choosing the ActivMoney facility in your savings account, you can enjoy the best of both worlds- instant access to your savings when you need it and higher returns when you don’t. Let’s understand how.
Understanding the ActivMoney savings account
ActivMoney is an auto sweep facility offered by some banks in India. This feature automatically transfers any idle funds in your savings account to a fixed deposit (FD), where they can earn higher interest rates.
In addition, the ActivMoney facility is very convenient. You don’t have to do anything to activate it. Once you set your threshold limit, the bank will automatically start transferring your idle funds to an FD
Suppose you have Rs. 50,000 surplus in your savings account. This means your idle funds are earning nominal interest rates most savings accounts offer. Instead of letting these funds sit idle, the ActivMoney savings account automatically transfers them into a Fixed Deposit (FD), where they can earn higher interest rates.
This facility ensures that your surplus funds continuously work for you without requiring constant monitoring or additional effort. It’s a smart way to maximise returns on your excess funds while maintaining full liquidity for any immediate financial needs.
To avail the facility of autosweep in savings accounts, you first have to set a minimum threshold. You or your bank decide this, and it depends on several factors, such as the type of savings account, the balance in the account, and the bank’s policies. Once the threshold is maintained and the autosweep facility is activated, the idle funds above that limit will be transferred to an FD. This way, you save money effectively and earn interest similar to an FD on your excess funds.
How does the ActivMoney facility work and multiply your savings?
Let’s assume you open a savings account with a bank offering the ActivMoney facility. If your savings account has a threshold limit of Rs. 25,000 and the current balance is Rs. 70,000, then Rs. 45,000 will be automatically transferred to an FD, and the remaining Rs. 25,000 will stay in the savings account. If your balance falls below the threshold limit or you have insufficient funds, the FD will be broken before its maturity to transfer funds back to your savings account without any additional cost or penalty.
Both FD and savings accounts will accrue interest at their respective rates. The interest rate on the FD will be higher than the interest rate on your savings account.. Thus, the idle funds in the savings account are utilised effectively, your money grows at a faster rate, and you can multiply your savings.
Another significant advantage of is the ease of use. Once you activate the facility, the sweep in and sweep out transactions occur automatically without any manual intervention. Moreover, you will not have to make additional investments or create a separate FD to take advantage of this facility.
Ending note
Overall, the ActivMoney savings account is a great way to multiply your savings. It’s easy to use, convenient, and helps you earn higher returns on your money.
Here are some of the key benefits of using the ActivMoney savings account:
- You can earn higher returns on your idle funds.
- The facility is automatic and convenient.
- There are no penalties for early withdrawals.
To avail this facility, simply contact your bank and enquire about adding this feature to your existing savings account. If your bank doesn’t offer it yet, you can even open a savings account online that comes with this feature enabled. So, start saving smartly today with ActivMoney grow your savings and reach your financial goals.