If you do this you will get FD like interest on savings account!

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There are millions of people who have money, but they don’t know where to put it. Keeping money at home is not beneficial because there is no return. Savings accounts offer only nominal returns. In this situation, today we will tell you about two such investments where you can earn a good return by investing your surplus money, meaning money that you currently have no plans to spend.

Usually, people either keep money at home or in a savings account. A savings account offers an interest rate of around 3% to 3.5%. State Bank of India (SBI) provides an interest rate of 2.70% to 3% on savings accounts, while HDFC Bank offers an annual interest rate of 3% to 3.5%. In this scenario, there are two investment tools: Sweep-in FD and liquid funds, where you can deposit your surplus or extra money. These options provide higher returns compared to a savings account, and the investments are considered secure.

Through the sweep-in facility, the money in your savings account is automatically transferred to an fixed deposit (FD) account. Let’s say your monthly expenses are 50,000 rupees. Under the sweep-in feature, you’ve set a cutoff limit of 50,000 rupees in your account. Now, any funds above 50,000 rupees in your account will automatically convert into an FD. This allows you to earn higher interest on the excess funds, which will be comparable to a regular FD.

For example, ICICI Bank, under its sweep-in facility, offers 7.1% interest on a 15-month FD, while providing a 7% return on 3 and 5-year FDs.

The tenure of a sweep-in FD usually ranges from 1 to 5 years, and in some cases, it can extend up to 10 years, depending on the bank. The benefit of a sweep-in FD is that during emergencies, if your account balance is low and you need to make a payment, the required amount will be swept from the FD back into your savings account. Interest will be earned on the remaining balance. You can initiate the sweep-in FD facility by contacting the bank directly or through internet and phone banking.

Now let’s discuss liquid funds. Liquid funds fall under the debt category of mutual funds. These funds invest in short-term instruments such as treasury bills, commercial papers, and high-rated government and corporate bonds.

According to Value Research, liquid funds have provided returns of around 6% to 7% during the past year. Therefore, their returns are higher than those of a savings account and approximately equal to bank fixed deposits (FDs). Withdrawals from liquid funds are processed within one or two days of application. Investments in liquid funds can be made directly through mutual fund platforms or through brokerage firms.

In sweep-in FDs, returns are guaranteed. However, it’s advisable to avoid premature withdrawal from FDs before maturity as it results in a loss of interest. In the case of liquid funds, investments are based on past returns, so it’s important to consider the historical performance of the fund.

The choice between sweep-in FDs and liquid funds depends on an individual’s financial goals, the need for funds, and the prevailing interest rates. If you have a substantial amount of money that you won’t need for the next 1 to 3 months, then liquid funds might be a suitable option for you.