A lot of banks offer a feature where they automatically move money from your savings account to a fixed deposit if your balance goes over a certain threshold. This is known as the auto sweep facility.
Banks have different names for the auto sweep facility, and this site has a list of banks that offer the auto sweep facility along with their names.
Manish has already written a very comprehensive post on auto sweeps, and with over 200 comments it does a good job in explaining the nuances of the scheme.
The basic idea behind auto sweep is that banks allow you to take advantage of the money lying “idle” in your account by giving you a facility where they automatically move money from your savings account to a fixed deposit of a certain maturity like 180 days, and then pay you a higher interest on that part of the money that’s in the fixed deposit.
I see that Axis bank calls this scheme Encash 24Â and they automatically create a fixed deposit of 180 days if your balance goes over a threshold.
Currently, the savings account rate is 4% and the 180 day rate is 7.5%, so you stand to gain the difference of 3.5% from their auto sweep facility.
I haven’t seen a bank charge for this, and some banks reduce the interest they give you by a percentage if you break the fixed deposit before the maturity, but that is still one or two points higher than what you would have gotten otherwise.
Like I said in the post about the highest savings account interest rateÂ – the extra interest income you make on this should not be big enough to make a meaningful difference to your overall returns and you shouldn’t spend too much time worrying about this.
Instead, if you do indeed find that a lot of your money moves from savings to fixed deposit or that you have money lying in your savings account that you don’t often use then just create a special fixed deposit in one of the high interest rate banks and really put it to work.