The lowest margin interest rates for major brokerage firms. Compare the best margin accounts interest rates at Etrade, Merrill Edge, Interactive Brokers, Charles Schwab, TradeStation, TD Ameritrade, Fidelity Investments, Firstrade, and Ally Invest.

Finding The Best Margin Rates

Whether you are shorting stocks, magnifying your buying power, taking out a margin loan from your broker, or using margin in any other way, understanding margin interest rates is important for many reasons.

One of the first things you should know is that margin interest rates are not universal. As a result, it really can pay to find the broker with the lowest margin rates.

We have compiled a margin rate comparison for the industry’s most popular brokers. Keep reading to see which brokers have the best margin rates.

Lowest Margin Rates

Before getting into which brokers offer the lowest margin rates, let’s have a look at margin interest rates and how they work.

Since margin is essentially borrowed capital from a broker, there is a fee attached to any sum you decide to borrow. Much like a credit card company or bank loan, brokers charge investors for the use of their capital.

Brokerage margin rates vary greatly, so it is a good idea to shop around a little if you intend to use margin as a part of your investment strategy. The cheapest margin rates are as low as 3.5%, and you can find some rates as high as 9.25%. As you can see, some brokerages are better for certain types of investing.

If you are looking for the best margin rates brokers have to offer, M1 Finance Plus, Interactive Brokers, Robinhood, M1 Finance, and Zacks Trade are the first places you should look. Ranging from 3.5% at M1 Finance Plus to 3.56% at Zacks Trade, these brokers provide margin interest rates that won’t break the bank.

If you are looking for the absolute lowest margin rates, they are offered by Interactive Brokers. You can borrow on margin to short stocks, increase buying power, and more, at a rate of 3.08%

Getting the Best Brokerage Margin Rates

To get the very best brokerage margin rates, you should consider the broker, and also your account size. Most brokers offer a range of rates. The larger your account, the lower your margin interest rates will be. When you find a broker that you like, check to see if you can take the margin rates down even further by depositing more trading capital.

No matter which broker-dealer you plan on trading with, it is always a good idea to keep tabs on the margin rates as they are subject to change. There are numerous things that affect margin rates, including changes in regulation, industry trends, and market volatility.

Brokerage Margin Rate Comparison

Although brokerage margin rates are always subject to change, they do remain stable ‘within their own zones’. Brokers with the best margin loan rates, for example, will usually remain so, regardless of fluctuating rate prices.

Here is a margin rate breakdown for the most popular brokerages in the industry:

Why Look for the Best Margin Interest Rates

Apart from the obvious reason that low margin rates equal fewer out-of-pocket expenses, there are a few other reasons that you might consider brokers with low rates.

For one thing, when you see that the lowest margin rates brokers offer are better than similar, competing brokers, there is a good chance that there are other benefits on offer as well. Low-cost brokers are generally focused on the ‘everyday investor’. They are known for features like commission-free trading, free stock giveaways, cashback offers, and more.

The increased buying power that comes with margin, the ability to take out cash loans, and the being able to take advantage of falling securities by selling shares, all create good opportunities for trading. Those account benefits and permissions also some with margin interest rates. The lower they are, the more advantageous the deal is for you.

Another reason to select brokers with low rates is that losses aren’t magnified as much. Paying margin interest after a winning trade is nearly unnoticeable. The same cannot be said for steep margin rates adding to losing trades.

Why Not Look for the Best Margin Interest Rates

Although we think that most investors would likely gravitate towards low margin interest rates, there is something to be said for brokers with higher rates.

Many of the brokers charging upwards of 8 and 9% are full-service brokerage houses that provide high-level investment services. So, with the higher rates you can often expect an experience more in line with a banking institution, rather than a fintech company.

Some of the larger firms offer direct routing, faster trade execution, and many other features. It is also common to see brokers with higher rates provide thigs like free market data, Level 2 at no extra charge.

Depending on your expectations, preferences, trading style (frequency, type, lot size), and many other factors, low margin rates may or may not be at the top of your list of priorities.

Taking Advantage of Low Margin Rates

Now, back to why we like low margin rates. By finding the lowest margin rates, it becomes easier to take advantage of the margin your broker offers. Not only can you hold positions longer and for less cost, but you can also borrow cash against your portfolio for much less.

To make the best of low margin rates, there are a few things to keep in mind.

First, you want to ensure that you manage risk. When you borrow money from your broker, there is an expectation that you will pay it back rather quickly - usually right after the trade you are using it for is finally closed.

If your trade goes south, and you cannot pay back the loan with funds in your account, you will be charged interest for every day that you are late.

Another thing to consider is keeping a good balance in your portfolio. It is not advisable for most investors to get over leveraged with a single security or small group of related securities.

Essentially, to take advantage of the low margin rates and to get the most from them, it is always good to make a plan for how your margin will be used.