What is margin interest?
Margin interest is the rate charged on the amount of the margin debit balance after the settlement of your purchase or withdrawal transaction. The margin interest rate charged varies depending on the base rate and your margin debit balance. If your account is margin enabled, you can see your base lending rate on the displayed page by selecting "View margin rate" under "Margin."
What is the margin interest charged?
TD Ameritrade utilizes a base rate to set margin interest rates. When setting the base rate, TD Ameritrade considers indicators including, but not limited to, commercially recognized interest rates, industry conditions relating to the extension of credit, the availability of liquidity in the marketplace, the competitive marketplace and general market conditions. The interest rate charged on a margin account is based on the base rate. Your particular rate will vary based on the base rate and the margin balance during the interest period. You can review the base rate and the balance schedule on the Rates & Fees page.
*Please note: The base rate may be changed without prior notice. A change to the base rate reflects changes in the rate indicators and other factors. Any changes will be posted on the Rates & Fees page when changes are affected within 30 days after the effective change.
How is it calculated?
Margin interest rates vary based on the amount of debit and the base rate. The formula is: Interest Rate x Margin Debit / 360 = Daily Interest Charge. Although interest is calculated daily, the total will post to your account at the end of the month.
Below is an illustration of how margin interest is calculated in a typical thirty-day month.
*The following is an illustration. Your actual margin interest rate may be different.
How do I avoid paying Margin Interest?
If you don't want to pay margin interest on your trades, you must completely pay for the trades prior to settlement. If you need to withdraw funds, make sure the cash is available for withdrawal without a margin loan to avoid interest. You may have to wait for recent trades or newly deposited funds to settle before you withdraw funds.
How do I view my current margin balance?
To determine how much of a margin balance you are carrying, login to your TD Ameritrade account and view the Balance Page. Margin Balance considering cash alternatives is under the margin tab and will inform you of your current margin balance.
How do I calculate how much I am borrowing?
Generally, margin balance can be calculated by using the following formula:*
Value of Long Marginable Securities – Equity = Margin Balance
*Assumes account is only long stock
Scenario
In the above example, the client’s account value is $5250, but the client owns $10,764.81 worth of securities. The difference between these numbers (-$5514.81) is the amount the client is borrowing on margin.
Does the cash collected from a short sale offset my margin balance?
No, TD Ameritrade segregates cash from a short sale and does not apply it to the margin balance.
When is Margin Interest charged?
Under normal circ*mstances, Margin Interest is charged to the account on the last day of the month.
Margin trading increases risk of loss and includes the possibility of a forced sale if account equity drops below required levels. Margin is not available in all account types. Margin trading privileges subject to TD Ameritrade review and approval. Carefully review the Margin Handbook and Margin Disclosure Document for more details. Please see our website or contact TD Ameritrade at 800-669-3900 for copies.
