Margin interest is the cost of borrowing funds from your broker to purchase securities in a Margin Account. Your account begins using margin when your cash balance reaches zero, and you continue buying securities.
How Margin Interest Accrues
Interest starts accruing at the end of any trading day when you have a margin balance.
Interest continues to accrue until the margin balance is fully repaid.
When you sell securities or deposit funds, the funds are applied to your margin balance immediately in your account view. However, interest will continue to accrue until the funds settle.
Other Scenarios That May Result in Margin Interest
Withdrawing funds before settlement: If you withdraw cash proceeds from a sale before settlement, you will be charged margin interest until the trade settles.
Option assignment or exercise: If an option assignment or exercise creates a debit balance, margin interest will be assessed even if you close out the resulting position on the day it posts to your account. This is because the exercise date—which is the trade date for settlement purposes—is the prior business day when the exercise notice was filed.
How Margin Interest Is Calculated
Margin interest accrues daily based on your outstanding margin loan balance using this formula:
Interest is typically billed monthly in the middle of the month. Margin Interest Rates can be located on the Pricing page of our website.