HDFC Sweep in facitity - Charges.

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Deal Subedar
InvestPotato

Being a investor, I am not a fan of FD’s
But since the market is ATH (All time high) I have redeemed some of my investments and some money parked in bank account.
Now, I can move this to debt/liquid funds but since the returns are low (may be less/more than FD) but I do not want to invest there (since it will be small time frame and lot of paper work) rather keep in bank account.

Now, Since Saving interest are -ve or 0 (adjusted to inflation) i want to park some in FD[which also is nearly 0 adjusted to inflation cry ] (for small duration) as i will be again investing the same in stocks/mutual funds after market corrects.

Also, Please do not suggest me IDFC First or savings bank with 7% interest rates. (Even no risks, paper work i.e. IT returns make it difficult)

Now, HDFC Bank has sweep in facility. I want to know

1. Minimum Normal FD required to start sweep in.
2. How sweep in works – As far as i know, it is first in last out.
3. Charges on sweep in/sweep out.
4. If xx,xxx amount is sweeped out in less than week/months, will it give -ve returns (in-comparison to saving interest)

I will add more questions/doubts and will create a complete article about this once i get sufficient info even if it not that promising.

19 Comments  |  
8 Dimers
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Deal Subedar Deal Subedar
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You will need to open a savings account in HDFC.
Any amount in excess of 1L is automatically converted to FD every Monday morning, with the prevailing interest on that Monday. This is called Sweep In FD.
You cannot reduce the 1L limit.
If you withdraw more than your savings account balance, the balance amount is automatically taken from the FD that was created last in line i.e. LIFO. There are charges when this happens.
There are no charges for the sweep in facility.
You get interest like any normal FD for the amount of days maintained. There is no rule like you have to maintain for a week/month.

Analyst Analyst
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In my experience, Every monday, excess amount over 1L goes to FD. Main account balance goes to negative for a few hrs or one day on spending any amount in excess of 1L, and eventually gets filled from FD. I tried it once about 2 weeks back, and there were no charges.

Somehow I was not comfortable with it since the tracking in my mind is not very clear. So not maintaining any excess balance in HDFC. I need to go to branch for opting out of auto sweep. I’m fine with the usual way of keeping the excess funds in manually created FDs.

On the paperwork/IT part, even the FDs created by auto sweep should be reported. Or am I missing something here?

Deal Lieutenant Deal Lieutenant
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ontherocks wrote:

You will need to open a savings account in HDFC.
Any amount in excess of 1L is automatically converted to FD every Monday morning, with the prevailing interest on that Monday. This is called Sweep In FD.
You cannot reduce the 1L limit.
If you withdraw more than your savings account balance, the balance amount is automatically taken from the FD that was created first in line i.e. FIFO. There are charges when this happens.
There are no charges for the sweep in facility.
You get interest like any normal FD for the amount of days maintained. There is no rule like you have to maintain for a week/month.

for max savings account, will above 25k amount converted to fd? or above 1L?

@andromeda

Analyst Analyst
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ontherocks wrote:

You will need to open a savings account in HDFC.
Any amount in excess of 1L is automatically converted to FD every Monday morning, with the prevailing interest on that Monday. This is called Sweep In FD.
You cannot reduce the 1L limit.
If you withdraw more than your savings account balance, the balance amount is automatically taken from the FD that was created first in line i.e. FIFO. There are charges when this happens.
There are no charges for the sweep in facility.
You get interest like any normal FD for the amount of days maintained. There is no rule like you have to maintain for a week/month.

Interest based on the number of days it was in FD right? I mean banks usually have a different interested rate structure based on the period of deposit

Deal Subedar Deal Subedar
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andromeda wrote:

Interest based on the number of days it was in FD right? I mean banks usually have a different interested rate structure based on the period of deposit

Yes, based on the number of days it was in FD.

Deal Cadet Deal Cadet
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Even on Sweep in etc types u will have to pay tax on interest, how is it different from IDFC savings account?

Pro Shopping Friend Pro Shopping Friend
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andromeda wrote:

On the paperwork/IT part, even the FDs created by auto sweep should be reported. Or am I missing something here?

No missing, everything has to be reported smile, I do not understand how keeping in SB makes IT returns difficult as OP mentioned.
Its better to go for IDFC first or Equitas b’cos(for short term or until u exhaust 10k exemption))
in case of Savings interest Rs10K is exempt under Section 80TTA
in auto-sweep in Rs10K interest exemption is not applicable as its kind of FD only

Deal Lieutenant Deal Lieutenant
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caks2006407 wrote:

No missing, everything has to be reported smile, I do not understand how keeping in SB makes IT returns difficult as OP mentioned.
Its better to go for IDFC first or Equitas b’cos(for short term or until u exhaust 10k exemption))
in case of Savings interest Rs10K is exempt under Section 80TTA
in auto-sweep in Rs10K interest exemption is not applicable as its kind of FD only

Also , do not forget that FD rates for less than 6 months are more worse than saving account normal interest rate.

Fd only good if planning to get fixed returns less risk and fall in category of senior citizens. Rate is better for senior and tax savings upto 50k applicable

Deal Subedar Deal Subedar
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caks2006407 wrote:

No missing, everything has to be reported smile, I do not understand how keeping in SB makes IT returns difficult as OP mentioned.
Its better to go for IDFC first or Equitas b’cos(for short term or until u exhaust 10k exemption))
in case of Savings interest Rs10K is exempt under Section 80TTA
in auto-sweep in Rs10K interest exemption is not applicable as its kind of FD only

Didn’t know about auto-sweep not being exempt from 80TTA. I guess parking at IDFC is a good option at 6%

Deal Subedar Deal Subedar
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andromeda wrote:

In my experience, Every monday, excess amount over 1L goes to FD. Main account balance goes to negative for a few hrs or one day on spending any amount in excess of 1L, and eventually gets filled from FD. I tried it once about 2 weeks back, and there were no charges.

Somehow I was not comfortable with it since the tracking in my mind is not very clear. So not maintaining any excess balance in HDFC. I need to go to branch for opting out of auto sweep. I’m fine with the usual way of keeping the excess funds in manually created FDs.

On the paperwork/IT part, even the FDs created by auto sweep should be reported. Or am I missing something here?

Yes, But, it wont be problem if you already have HDFC Saving bank account. (You anyways are reporting it earlier)
Also they provide interest certificate (again which is already used for earlier returns)

Deal Subedar Deal Subedar
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dhinchakrohit wrote:

Even on Sweep in etc types u will have to pay tax on interest, how is it different from IDFC savings account?

You do not need to get data from 2 bank accounts
(See, its not a lot of paper work, But i dont prefer oprning x no. of accounts, primarily no one knows the charges in closing/maintaining the account)

Analyst Analyst
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InvestPotato wrote:

Yes, But, it wont be problem if you already have HDFC Saving bank account. (You anyways are reporting it earlier)
Also they provide interest certificate (again which is already used for earlier returns)

I have savings max, but the thing the excess amount is kind of random variable. In my case, it gets difficult to track. Usually I calculate all my requirements, some extra buffer and move the excess funds (some round figure to keep it easy to track) to FD manually. This manual FD will not be in HDFC, instead it will be IDFC, SBI etc

Deal Subedar Deal Subedar
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Some clarifications -
1. I know interest earned from sweep-in needs to reported, this is fd only.
2. Paper work hear means, seeing the account balance of one extra account, learn about changing maintanance fees and closing account cost (if interest rates decreases)
3. I already have an account in HDFC and so funds are present there, no need to move funds. (Already using interest statement for tax)
4. Know that 10,000 is exempted via 80TTA
5. I somewhar agree with @chotabheem, that’s why i asked if sweep in we can get give -ve returns than savings.

I will do more calculations as per input.
I think I get how they calculate the FD. Once i spend time on this.
I will come back with the numbers.
Thanks Dimers, For past 1 year I am thinking to understand this (with numbers) but did not get time/am lazy. But, I kind of get inner feeling for starting it might be worst then savings in the same bank.

Also for simplcity, ignore the TTA part /assume person already earns 10K in interest.

@andromeda, interest should be reported, So, Charges could be like (less interest, and sometime it is less than savings)

Deal Subedar Deal Subedar
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dummyuser wrote:

Didn’t know about auto-sweep not being exempt from 80TTA.

The name itself has the word “FD”.
80TTA is only for interest from savings account.

Deal Subedar Deal Subedar
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So, There are points that need to be considered
https://www.hdfcbank.com/personal/resources...es

1. No interest for withdrawal/sweep-out before 7 days (The Minimum tenure for earning FD interest is 7 days.)
2. 1% low interest rates (In case of premature closure of Fixed Deposit (including sweep in / partial closure) the interest rate will be 1.00% below the contracted rate or the base rate applicable for the period the deposit has remained with the bank, whichever is lower.except for the deposits booked with tenor 7-14 days.)

So, Using this two above points it is evident, sweep will fetch you less for any holding less than 6 months.
Better do normal FD.

Analyst Analyst
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InvestPotato wrote:

So, There are points that need to be considered
https://www.hdfcbank.com/personal/resources...es

1. No interest for withdrawal/sweep-out before 7 days (The Minimum tenure for earning FD interest is 7 days.)
2. 1% low interest rates (In case of premature closure of Fixed Deposit (including sweep in / partial closure) the interest rate will be 1.00% below the contracted rate or the base rate applicable for the period the deposit has remained with the bank, whichever is lower.except for the deposits booked with tenor 7-14 days.)

So, Using this two above points it is evident, sweep will fetch you less for any holding less than 6 months.
Better do normal FD.

Ideally Sweep should fetch the interest rate as per the number of days it stayed as FD, unlike premature closure, because the customer didn’t really tell them in the first place that we creating FD so specific number of days.

I’m glad that my intuition didn’t go wrong

+kg

Deal Cadet Deal Cadet
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meri sweep account hai pnb mein. uska interest fd interest mein calculate hoga ya savings bank interest mein?

Missing