How do sweep transfers work?

We recently announced the launch of Sweep Transfers in the Astra app (release v1.1.0), which marks the first time this advanced banking feature is directly available to consumers! Since “sweeps” are typically only available via private banking accounts, we thought we should share a little more about why we’ve developed them for Astra, outline how they work, and run through a scenario comparing the results of “sweeps” versus a standard recurring transfer.

Why “sweeps”?

Our goal has always been to create a smarter and more automated banking experience – one that helps optimize your cash flow so you can maximize savings and ensure your money is in the right place at the right time. We started with building basic transfer Actions for Astra so that you easily transfer money every week, two weeks, or month to a savings goal or another external bank account.

That’s great, but a one-size fits all approach to the amount specified for transfers doesn’t accommodate volatility in your balances very well. Lumpy income, the holidays, or an unexpected expense can dramatically change your balances month to month. So, what happens if you have a temporary dip in your primary checking account? Enter “sweeps!”

  • Sweeps calculate the amount to transfer dynamically based on your current balance and run on your desired schedule.
  • Sweeps don’t overly “stretch” your account balance if you have a short term dip in funds on hand – if your balance is less than the minimum you specify, nothing happens.
  • If you have fewer expenses within the recurring time period (well done!), sweeps will transfer more money which can outpace a simple recurring transfer.
As a result, using sweeps you can continue to automatically move funds to your desired destination account with worrying your transfers will overly affect your source account. Powerful!

How do “sweeps” work?

Sweep transfers automatically move funds over a given amount from one account to another on a recurring basis (here’s more detail on the more traditional use of sweeps). In the Astra app, you need to specify the following details to set up a Sweep Action:

  • Source Account – where to transfer money from
  • Destination Account – where to transfer money to
  • Minimum Balance – any funds over this amount in the Source Account will be transferred
  • Start Date – when to start running the Action
  • Frequency – how often to run the Action (weekly, bi-weekly, or monthly)

To illustrate how this would work, let’s consider the following 7-day scenario. At the end of the month, you are comfortable having $4,000 in your account so you’ve set a sweep to run on the 30th of the month (here’s a spreadsheet with this data) :

  • 01/28:
    • Your source account balance is $2,746.
  • 01/29:
    • You get paid +$2,653 💪, so your balance increases to $5,399.
    • Your friendly space octopus, Otis, sends you an email with an estimated amount of $1,399 for tomorrow’s sweep transfer – don’t worry, you can always pause or adjust the minimum balance before tomorrow.
    • You have dinner with a friend -$27.50 🌮 that evening, bringing your balance to $5,371.50.
  • 01/30:
    • Your sweep transfer is initiated based on your new current balance (post tacos) in the amount of $1,371.50 ($5,371.50-$4,000).
    • Your balance at the end of the day is $4,000.
  •  01/31:
    • No transactions so your balance stays at $4,000.
  • 02/01 and beyond:
    • Your account balance proceeds as normal, you pay rent of $565, etc.

A comparison:

You may already have a monthly recurring transfer set aside $100 on the 30th of every month, so you might wonder how sweeps might be better for meeting your savings goals. Let’s consider the following 6-month scenario (also in the same spreadsheet).

Option A: Save $100 every month – by June you have saved $600.

Option B: You use a Sweep Action with a minimum balance of $4,000 and you have some volatility to your account balance +/- $300 each month.

The total amount saved will be dynamic based on your account balance and changes month-to-month. With these end of month balances, you’ve saved $718 or $118 more than the standard recurring Action. Notice the months March through May include small or even no transfer at all to accommodate the lower than usual account balance. In April, the recurring transfer would accentuate the lower value by continuing to transfer money despite the source account having a balance below $4,000.

In conclusion:

When we were considering what Action type to develop next, we were looking for a routine that would dramatically expand how you can define transfers on our platform so you are empowered with more tools to manage your money in the way that’s best for you. Sweep transfers are the first step in accomplishing that objective and by releasing this feature, we’ve democratized access to a function typically only available through brokerage or private banking accounts. Give Astra a try and let us know how you use sweeps!

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