Overview of Margin Accounts at Charles Schwab
Besides cash trading, Schwab also offers margin trading. This feature opens up a great deal more investing opportunities, so it’s worth checking out.
Important points:
• Margin accounts can be opened at Charles Schwab.
• Limited margin can be added to an IRA at Schwab.
• It’s easy to upgrade a cash account to a margin account on Schwab’s website.
Charles Schwab Margin Rates
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Debit Balance
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Charles Schwab Margin Rate
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$0 - $24,999.99
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12.575%
|
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$25,000 - $49,999.99
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12.075%
|
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$50,000 - $99,999.99
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11.125%
|
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$100,000 - $249,999.99
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11.075%
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$250,000 - $499,999.99
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10.825%
|
|
$1,000,000+
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call 877-752-9749
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Free Charles Schwab Account
Visit Schwab Website
Details on Schwab’s Margin Service
A brokerage account (and some investment-advisory accounts) at Schwab can trade on margin. The basic option is cash trading, although Schwab’s online form allows an account to be set up straight away as a margin account. Selecting margin creates a larger list of investment strategies. Examples include option spreads, short positions, and leverage on long positions.
Although brokerage accounts are usually the ones to be set up with margin, some of Schwab’s managed accounts are also eligible for margin. Per industry regulations, any account, brokerage or investment-advisory, that wants to actually use margin must have at least $2,000 in assets.
And it’s not just taxable accounts at Schwab that can sign up for margin. Individual Retirement Accounts (IRAs), but not 401k accounts, can use limited margin. With this service, the IRA can trade option spreads. Short uncovered option plays are not available in any IRA, cash or margin. An IRA with limited margin can trade with unsettled funds, which allows it to day trade. The one caveat here is that Schwab increases the account minimum from $2,000 to $25,000 to qualify for limited margin.
Not all account structures at Schwab are eligible for margin. Global accounts are cash only, as are charitable and nonprofit accounts. Customers residing in some foreign countries also cannot use margin.
Taxable accounts that are eligible for margin can invest using leverage, which allows for the purchase of securities with borrowed money. This will, of course, come at a cost. And cash can be withdrawn from a margin account at the same rates.
Opening a Schwab Margin Account
A new account at Schwab can be set up as either a cash or margin account (assuming the account structure is eligible for margin). Just look for the cash or margin option on the application.
If an existing account is a cash account, it can apply for margin capability. The necessary application will be found on Schwab’s website. After logging in, click on the icon for the little guy in the upper-right corner. In the drop-down list of links, select Margin & Options.
On the next page, select the account you want to add margin to in the blue drop-down list of accounts (in case you have more than one at Schwab). Next, scroll down to find the button to apply for margin. Beneath this, there is a section to apply for an options level, too.
If you would rather do it the old-fashioned way, a paper application can be used instead of the website:
Paper application for limited margin
Paper application for full margin
When submitting either application, you should read over the fine print included in the application.
Trading on Margin
Once an account is enabled for margin trading, it can start trading option spreads right away (some of these strategies are already integrated in Schwab’s platforms). This assumes it has the minimum amount of funding.
A security’s profile at Schwab shows its maintenance margin requirement. On the website, look for the link in the summary tile at the top. For Abercrombie & Fitch (ticker symbol ANF), we found a special maintenance requirement of 40%, which is somewhat higher than the standard 30%.
Options and bonds have their own margin requirements. Special securities, like 3x leveraged ETFs, have their own numbers as well. Side of the trade, such as long or short, and the price of the security, can affect margin numbers as well.
Schwab Margin Interest Rates
Schwab customers who withdraw cash or buy securities on margin will pay interest on the following scale:
|
Debit Balance
|
Charles Schwab Margin Rate
|
|
$0 - $24,999.99
|
12.575%
|
|
$25,000 - $49,999.99
|
12.075%
|
|
$50,000 - $99,999.99
|
11.125%
|
|
$100,000 - $249,999.99
|
11.075%
|
|
$250,000 - $499,999.99
|
10.825%
|
|
$1,000,000+
|
call 877-752-9749
|
There is no cost for enrolling an account in margin. Interest is charged only if an account uses margin. Because an IRA is not permitted to withdraw on margin or actually buy anything on margin, it is not charged interest.
Schwab Margin Rates Judgment
Charles Schwab has a really good margin service with competitive interest rates.
Free Charles Schwab Account
Visit Schwab Website
Updated on 4/3/2025.
Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
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