GONE are the days when all a bank offered was a savings account, fixed deposit (FD) and a recurring deposit.

Today, banks are topping up plain vanilla schemes with a variety of features.

Flexible savings and flexible FDs
There are typically two categories of accounts covered here.

1.    A fixed deposit account that allows you to withdraw funds as and when you need them.

2.    A sweep account, that is, a savings account where balance exceeding a predetermined limit is automatically transferred to a fixed deposit account.

Let's understand these two accounts better.

Flexible FD
You will have to open a fixed deposit for a specific term with your bank. The minimum FD amount varies from Rs 25,000 to Rs 50,000, depending on the bank you choose. Also, depending on the amount of FD, you will be given the option to maintain a zero balance savings account. Naturally, higher the FD amount, greater are the chances of a zero balance savings account.

Now, as and when you require funds or if you require funds in excess of the balance in your savings account, the bank will allow you to partially break your FD to meet your requirements.

How it works:
IDBI Bank and ABN AMRO will break your FD into units of Rs 1,000. So if you need to withdraw Rs 15,200, a sum of Rs 16,000 will be transferred from your FD to your savings account. In the case of HDFC Bank, the FD is broken down into units of Re 1, so only the amount that you have to withdraw will be transferred to your savings account. The balance in your fixed deposit account will continue to earn interest as per the decided rate.

The amount withdrawn will have earned interest up to the date of withdrawal at the rate applicable for the period the money was with the bank.

Reverse sweep possible?
You cannot do a reverse sweep, that is, you cannot transfer funds from your savings account into your FD. However, you must remember that the FDs will be broken on a FIFO (First In First Out) basis, which is the first FD opened will be broken first.

Read: Managing your bank account

Photograph: Al Bbello/Getty

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e-mail: Team Wealth

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