Best Margin Rates

Best Margin Rates for online trading explained by professional Forex trading experts the “ForexSQ” FX trading team. Finding out the Best Margin Rates for online trading.

What Is The Best Margin Rates for Online Trading?

Using margin can be a powerful tool, if used carefully. Though finding out which stock broker has the lowest margin rate can be time consuming. We’ve collected the most popular brokers and list the best margin rates at various deposit amounts.

I personally don’t use margin that often, but my taxable accounts are margin based by default. It doesn’t cost anything additional to set up a brokerage account on margin. I have my accounts set up up with margin just in case I ever have the need to use it. It can be helpful when you’ve sold one stock, and don’t have enough money to cover a new purchase. Otherwise without margin you are forced to wait until the sold stock is cleared and the money is deposited within your account. This can take a few days to occur, and you could lose out on an investment opportunity in the meantime.

The margin rates listed here are what’s publicly listed on the respective broker’s web site. In some cases, it’s possible to get a better rate than what is advertised. So if you are with an existing broker and want a lower margin rate, it’s best to contact them first before switching. Like credit card terms, it is possible to negotiate a better rate.

Why Use Margin?

Some use margin accounts to borrow money for investments outside of their stock portfolio (e.g., a down payment on a house), without having to sell stocks. If planned carefully it can be a wise decision, so you don’t have to sell your stock and pay tax on the capital gains.

Other investors use it as a form of arbitrage like Interactive Brokers mentions in their commercials. You borrow at a lower interest rate than a stock’s dividend payout rate. There are many dividend aristoctrats with higher payouts than Interactive Broker’s margin rates. You pocket the difference between the two.

Is Using Margin Risky?

Leveraging using margin can also backfire on you if you aren’t careful. You could be forced into a margin call because the stocks you own have decreased in value and are below your margin limit. So you experience double jeopardy, forcing you to sell stocks at the worst time. So it’s critical you don’t leverage too much, if you use margin.

In most cases you are paying a heavy premium for it. The current Federal Funds Rate (at the beginning of 2016) is at 0.50% – 0.75%, and you would expect margin rates to also be low. In the table below, you’ll see that most of the brokers make off very well with the interest they charge. An exception to this is Interactive Brokers. It would be very difficult to profit on margin with TD Ameritrade since many dividend stocks and fixed income earn less than 7.00%.

Though not listed in the table, Interactive Brokers offers margin rates below 1.00% for deposit amounts of $2,000,000 or greater. I’m assuming this is outside the scope of most investors. If you are an ultra-high-net-worth individual, this could be a great way to borrow against your stock assets.

If you do use margin for investing or short term loans, make sure you understand the risks and the costs. Otherwise, it could be a costly investment lesson. Depending upon the broker you choose and the amount invested, it might be better to get a short term loan from another source. Using unsecured debt from credit cards has less risk, or a loan from P2P lenders like Lending Club or Prosper.

Margin Rate Comparison

To see more brokers, please scroll right in the table.

Deposit AmountAlly InvestCharles SchwabE*TRADEFidelity InvestmentsFirstradeKapitallLightspeed TradingMerrill EdgeMotif InvestingSogoTradeTD AmeritradeTradeStationVanguardDeposit Amount
$0 – $4,9998.75%8.575%9.75%8.575%8.50%7.50%7.75%9.625%9.50%9.25%9.50%8.50%7.75%$0 – $4,999
$5,000 – 9,9998.75%8.575%9.75%8.575%8.50%7.50%7.75%9.625%9.50%9.25%9.50%7.50%7.75%$5,000 – 9,999
$10,000 – $24,9998.75%8.575%9.50%8.575%8.25%7.50%7.75%9.625%9.00%8.25%9.25%8.50%7.75%$10,000 – $24,999
$25,000 – $49,9998.50%8.075%9.25%8.075%8.00%7.50%7.75%8.500%9.00%8.25%9.00%8.25%7.25%$25,000 – $49,999
$50,000 – $99,9997.75%7.125%8.75%7.125%7.50%7.00%6.75%8.500%8.50%7.25%8.00%7.75%7.00%$50,000 – $99,999
$100,000 – $249,9996.50%7.075%8.25%7.075%7.25%5.50%6.75%7.125%8.00%6.00%7.75%7.75%6.00%$100,000 – $249,999
$250,000 – $499,9995.50%6.825%7.75%6.825%7.00%5.50%6%7.125%7.50%5.50%7.50%7.25%6.00%$250,000 – $499,999
$500,000 – $999,9995.00%6.575%7.25%4.500%5.00%5.50%5.50%6.875%7.00%5.00%7.50%7.25%5.75%$500,000 – $999,999

Best Margin Rates Conclusion

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