Why Are Interactive Brokers Margin Rates so Low?


If you’ve seen the margin rates at Interactive Brokers, you might have wondered exactly how the popular online discount broker can afford to lend out cash for securities trading at such low rates.

The simple answer is that Interactive Brokers has millions of active trading clients, and they generate significant revenue every day via trading commissions and fees.

On a global basis, Interactive Brokers is one of the largest discount online brokers. They process more than 1,000,000 trades Monday through Friday.

Interactive Brokers Charges you Fees

The other reason why Interactive Brokers can afford to have low margin rates is because they charge for basic account features, like market data and news subscriptions.

Most brokers include free level 2 data, but Interactive Brokers passes these charges along to clients. Moreover, Interactive Brokers also charges a monthly inactivity fee of $10 if no trades are made and you account balance is less than $100,000.

A Better Choice than Interactive Brokers

Simply put, if you value customer service and NO AUTO LIQUIDATION, you need to avoid Interactive Brokers at all costs.

Instead, Tastyworks is the most popular online brokerage firm for options and futures traders, because there are $0.00 assingment fees.

Plus, their downloadable trading platform is institutional-level quality.

If you’re thinking of signing up for an Interactive Brokers account, we strongly recommend choosing Tastyworks instead. You’ll get better customer service, better pricing, and no BS inactivity or monthly maintenance fees. The account minimum is also much lower at $2,500, compared to Interactive Broker’s $10,000 requirement.

Another Reason why Interactive Brokers has Low Margin Rates

Since Interactive Brokers caters towards more of a professional full-time trader, often with balances in the multi-million range, IB can make as much money with margin loans with low rates as E*Trade can with high rates.

If you’re interested, and you’ve made it this far in the article, you may enjoy reading about how I painfully lost $120,000 with Interactive Broker’s auto liquidation.

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