Brokers With Lowest Margin Interest Rates
Recently I did some research into brokers with low margin interest rates and with low trading commissions ($3 or less per trade). Since I already had them all typed out in my notes, I thought I would post them in case someone else might find it useful. The rates are valid on or around April 28, 2009.
eOption.com (affiliated with placetrade and investrade) (see important update below)
- BC + 1.5% = 3.5% for up to $50,000
- BC + 0.75% = 2.75% for $50,000 to $99,999
- BC + 0.0% = 2.0% for $100,000 to $249,999
- BC – 0.5% = 1.5% for $250,000 to $499,999
- BC – 1.0% = 1.0% for $500,000 and above
- Interest @ 2.75% for $80k a month = $183.33, after tax = $100.83
- Interest @ 2% for $100k a month = $166.67, after tax = $91.67
- Trading fees : $3 per ticket
- ACH transfer limit = $50,000 a day
Just2trade
- BC + 0.75% = 2.75% for up to $100,000 (confirmed with them that there is a typo on their margin rates page)
- BC + 0.5% = 2.50% for $100,000 to $250,000
- Interest @2.75% for $80k a month = $183.33, after tax = $100.83
- Interest @2.50% for $100k a month = $208.33, after tax = $114.58
- Trading fees : $2.50 per ticket
Interactive Brokers
- BM + 1.5% = 1.65% for up to $100,000
- BM + 1% = 1.15% for $100,000 to $1,000,000
- BM = Feds fund rate = 0.15%
- Interest @1.65% for $80k a month = $110.00, after tax = $60.5 + $10 monthly fee
- Interest @1.15% for $100k a month = $95.83, after tax = $52.71 + $10 monthly fee
- Minimum fee $10 a month
- Trading fees : 0.005 per share, minimum $1
- 2nd withdrawal in the month : $1 by ACH, $4 by check, $10 by wire
Options House
- BC + 2.25% = 4.45% for up to $50,000
- BC + 1.45% = 3.45% for $50,000 to $499,999
- BC + 0.45% = 2.45% for over $500,000
- Interest @ 3.45% for $80k a month = $230, after tax = $126.5
- Trading fees = $2.95 per ticket
WellsTrade (Wells Fargo) (called 4/28/09 10.10am)
- WFI, Wells Fargo base rate = 4.00%
- WFI + 3% = 7% for up to $10k
- WFI + 2.75% = 6.75% for $10k to $25k
- WFI + 2.25% = 6.25% for $25k to $50k
- WFI + 1.75% = 5.75% for $50k to $100k
- WFI + 1.25% = 5.25% for $100k to $250k
- Trading fees : up to 100 free trades a year
Note: BC is the broker call rate, currently 2%. The “after tax” number reflects a 45% combined federal and state marginal income tax bracket.
Comments
The absolute lowest rates are from Interactive Brokers but they want to charge you a minimum of $10 in trade fees a month. If your trade fees do not add up to $10, they will deduct $10 anyway.
The next best rates are from eOption.com — at BC = 2% for amounts from $100k to $250k. This rate is lower than the interest rates from leading savings accounts, and is also cheaper than a HELOC loan.
I included the margin schedule at WellsTrade for comparison only because I have an account there. Their rates are not at all competitive.
I also looked at some other brokerages like Fidelity, VBS (Vanguard), TD Ameritrade, Scottrade, Firstrade, Tradeking, Etrade, Charles Schwab, Options Express, Sogotrade, MB Trading. Their rates are all higher.
Other resource(s)
Update 8/03/2009
eOption increased their margin rates as of 8/1/09. The new schedule is as follows (BR, base rate is 5%):
- BR = 5.0% for up to $50,000
- BR – 0.5% = 4.5% for $50,000 to $99,999
- BR – 1.0% = 4.0% for $100,000 to $249,999
- BR – 1.5% = 3.5% for $250,000 to $499,999
- BR – 2.0% = 3.0% for $500,000 to $999,999
- BR – 2.5% = 2.5% for $1,000,000 and above