Why all the fee is hidden and usually charged without notice?
I have been charged a fee in excess of Rs. 600 for not having enough balance in the savings account for a SIP whereas I had enough money in the FD - if I had known this I would have simply moved money from FD to the savings account.
From this article, I came to know that it’s known as ECS fee. https://www.moneycontrol.com/news/business/personal-finance/all-about-the-charges-and-penalties-that-banks-levy-5544731.html
You can actually link your FD to savings account. It’s called sweepin feature. Whenever money is less in savings account, rest of the money will be deducted from FD. Most banks offer this feature.
How does one setup at kotak bank let’s say?
Hey isn’t FD liked fixed for a specific time period? How can you carry out transactions from there?
You will have an option to link it in net banking.
Say u have an FD of 5k with maturity of 1 year at 6% interest rate and you started it 30 days back.
Today, your savings account balance is 2k. Now, you do a transaction of 3k. 2k will be debited from your savings account and rest 1k will be deducted from the FD. Rest 4k in FD will be as it is and continue to earn 6%. You will get interest for this 1k based on prevailing rates of 30 day FD as you have kept this 1k only for 30 days. There might be penalty on this interest given on 1k based on the bank as you have withdrawn before maturity period. Penalty will be only from the interest amount and not from principal.
Since you have withdrawn 1k before 1 year, you will get less interest amount at end of 1 year on the overall FD
Thanks for this detailed explanation mate
My question is if this is super awesome then why don’t bank enable this by default. I haven’t used banking from web in ages, I use apps majorly and not sure if there is an option to enable this in the app. And even when I tried on the web it’s not one of the easiest of things to set up.
Some (or most) people park money in FD as an investment and don’t want to use that money for transactions. From an investment and discipline POV, auto-enabling an FD sweep-in is counter productive for the customer. Plus, with this, people will maintain lower float in the SA by making multiple FDs. This is loss-making for the bank as FDs have a higher interest cost.
Welcome to the community Karn
I second that, if expenses are allowed to be done through money that was saved for investments defeats the purpose.
I would value 2 things here:
- Stop me spending money saved/ invested for purpose other than the goal
- Allow sweep in from SA to FD if balance exceeds a certain threshold
The second point is interesting. But SA to FD sweep-in can only work (or result in a good CX) with a sweep-out - the objective here is not forced savings, but higher interest while maintaining liquidity.
One solution can be to classify sweep-in FDs separate from those created by the customer, and only use the former for a sweep-out in case there are insufficient funds for a transaction.
A simpler way to achieve this objective is what a few SFBs and IDFC Bank offer - a higher interest rate (almost equalling FD rates) above a certain balance threshold. What do you think?
Maybe there are more use cases to solve for? The one I was talking about comes from personal pain, as much as I would like to save and earn more I dont end up doing that. And most money is idle as liquid money in my savings account.
So a sweep-in just for building a savings habit would be super helpful.
So you’re saying sweep-in without an attached sweep-out so that it becomes a habit builder / sort of forced-savings?
I’m not sure why this would be better than an RD/ (goal based RD is even better). Because the sweeped in amount would vary - there would be more instances of FD redemptions (a discipline breaker). Low spend spells resulting in higher allocation to FD, which would result in above average spend spells requiring a liquidation.
Isint it better to unbundle the 2 use cases - higher interest rates with min. effort/involvement and savings habit builder?
My objective was to maximize for savings and sweep-ins with multiple rules would serve better than the current RD (basis fixed sum).
But the more important questions is: do users see both of these as unbundeled or are they like ‘save for me and give me a better return’?
While going for FD opt for SWEEPIN option you will be able to do the same