Sweep account

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A sweep account is an account set up at a bank or other financial institution where the funds are automatically managed between a primary cash account and secondary investment accounts.


Contents

Overview

A sweep account is a combination of two or more accounts at a bank or financial institution. It is useful in managing a steady cash flow between a cash account used to make scheduled payments, and an investment account where the cash is able to accrue a higher return. Many banks and financial institutions offer a sweep account Import services or service for personal customers and small business owners. It has also become part of the arsenal of services offered by credit card companies.



Company policy issues

Some companies choose to have all of their funds swept into a sweep account if they believe that the increased earnings will more than offset the fees they would have been rebated, should they have left the funds in the account. Other companies calculate the approximate amount needed to rebate the fees and then only sweep funds in excess of that amount. Companies pay extra for more complex investment strategies, and for more detailed communication from their bank. For example, knowing when the checks they issue will probably clear, enables them to more precisely determine how much to invest and for how long. This service is known as controlled disbursement.


References:

1.http://en.wikipedia.org/wiki/Sweep_account


External Links:

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