When “you’re on margin,” it means that you’re borrowing money to hold securities positions. Options are non-marginable, meaning you cannot buy options on margin, but you can use margin to buy stock. Margin Interest is charged when the cash balance in an account is negative, generally due to borrowing cash to hold marginable positions. Cash balances across related margin accounts will not offset, and any negative cash balance will accrue margin interest individually across related and unrelated margin accounts.
Typically, the first day after the 15th of the month
Margin interest charges are taken out of the account on the first business day after the 15th of the month (this usually falls on the 16th). Interest is charged for the period starting on the 16th of the previous month and ending on the 15th of the current month. Margin interest is also charged for margin balances on weekends and holidays. Below is an example of a margin interest charge in the desktop platform's History tab. In the History tab, a Money Movement entry lists the timeframe, margin interest rate, and total interest charged.
Pending Cash Entry
Additionally, accounts subject to margin interest will see a pending cash entry list on the account. Pending Cash entries listed due to a margin interest will deduct from the account's buying power.
Margin interest is accrued daily and charged monthly when the cash in an account is negative. The interest accrued each day is computed by multiplying the settled margin debit balance by the annual interest rate and dividing the result by 360. The amount of the debit balance determines the annual interest rate on that particular day.
What is a settled margin debit balance?
A settled margin debit balance is the debit balance in an account as determined by the settled transactions. In short, margin interest is charged trade settlement to trade settlement, which is the settlement time of the opening trade (or assignment) to the settlement time of the closing trade. Additionally, proceeds from short stock positions are held in a different sub account type at our clearing firm, so they do not count towards the net margin balance.
To learn how to find out if your account is margining securities, then please click here.
Debit Balance | Rate | Base Rate Adjustment |
|---|---|---|
< 25,000 | 11.00% | +1.00% |
25,000 - 49,999 | 10.50% | +0.50% |
50,000 - 99,999 | 10.00% | 0.00% |
100,000 - 249,999 | 9.50% | -0.50% |
250,000 - 499,999 | 9.00% | -1.00% |
500,000 - 999,999 | 8.50% | -1.50% |
> 1,000,000 | 8.00% | -2.00% |
Base Rate: 10% as of October 1st, 2022
*Base rate is subject to change without notice
Additionally, you may view our margin rates by visiting our Commissions and Fees page by clicking here.
Describing Settlement with Trade Date + 2 business days (T+2)
Mid-Week Assignment
- Assigned stock on Wednesday (position appears in the account on Thursday) and margining $10,000. The assigned position settles on Friday.
- Close out of the assignment on Thursday (next trading day), but due to trade settlement, the closing order technically does not settle until Monday. As a result, margin interest is charged from Friday to Monday (four days), including the weekends.
- Approximate Interest Charge: ($10,000 x 0.11 rate) / 360 = $3.05 daily interest charge x 4 days = $12.22 total.
End of Week Assignment
- Assigned stock on Friday (position appears in the account on Monday) and margining $50,000. The assigned position settles on Tuesday.
- Close out of the assignment on Monday (next trading day), but due to trade settlement, the closing trade does not settle until Wednesday. As a result, margin interest is charged from Tuesday to Wednesday (one day).
- Approximate Interest Charge: ($50,000 x 0.10 rate) / 360 = $13.89 x 1 day = $13.89 total.
