Sweep Account Calculator

What is a Sweep Account?

A sweep account is a type of savings account that automatically transfers funds between different interest-bearing accounts to maximize earnings. These accounts are typically offered by banks and credit unions, and they can be a good way to grow your savings without actively managing your money.

Sweep accounts work by moving funds from a lower-interest account to a higher-interest account when the balance reaches a certain threshold. For example, you might have a checking account that earns 0.1% APY and a savings account that earns 1.5% APY. With a sweep account, your money would automatically move from the checking account to the savings account when you have $1,000 or more in the checking account.

How Sweep Accounts Work

Sweep accounts typically have two components: a primary account and a sweep account. The primary account is where you deposit your money, and the sweep account is where the money is transferred to earn higher interest.

When you open a sweep account, you'll need to set some rules for how the money should be transferred. These rules might include:

• The minimum balance required to trigger a transfer
• The maximum balance that can be transferred
• The frequency of transfers (daily, weekly, monthly)
• The interest rates for the primary and sweep accounts

Once you've set up your sweep account, the bank or credit union will automatically transfer funds between the accounts based on the rules you've established. You can usually monitor your sweep account activity through online banking or mobile banking.

Calculating Sweep Account Interest

Calculating the interest earned from a sweep account involves understanding the interest rates for the primary and sweep accounts, as well as the rules for transferring funds between them. The formula for calculating the interest earned from a sweep account is:

To use this formula, you'll need to know the current balances in your primary and sweep accounts, as well as the interest rates for each account. You can then plug these numbers into the formula to calculate the total interest earned.

It's important to note that sweep accounts typically have a minimum balance requirement to earn interest. If your account balance falls below this threshold, you may not earn any interest on your funds.

Example Calculation

Let's say you have a sweep account with the following details:

• Primary account balance: $5,000
• Primary account interest rate: 0.1% APY
• Sweep account balance: $10,000
• Sweep account interest rate: 1.5% APY

Using the sweep account interest formula, we can calculate the total interest earned as follows:

In this example, the sweep account earns $155 in interest over the year. This is a significant amount of interest, especially considering that the primary account only earns $5 in interest.