Robinhood Margin Account Rates
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Debit Balance
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Margin Interest Rate
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above $1,000
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4.25%
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below $1,000
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$5/month
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The Lowest Margin Rates
| Broker |
$0 - $4,999 |
$5,000 - $9,999 |
$10,000 - $24,999 |
$25,000 - $49,999 |
$50,000 - $99,999 |
$100,000 - $249,999 |
$250,000 - $499,999 |
$500,000 - $999,999 |
above $1,000,000 |
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M1 Finance Plus
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3.5%
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3.5%
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3.5%
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3.5%
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3.5%
|
3.5%
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3.5%
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3.5%
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3.5%
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|
Robinhood
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4.25%
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4.25%
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4.25%
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4.25%
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4.25%
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4.25%
|
4.25%
|
4.25%
|
4.25%
|
|
ZacksTrade
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3.56%
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3.56%
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3.56%
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3.56%
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3.56%
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3.06%
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3.06%
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3.06%
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2.81%
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What is Margin on Robinhood?
Robinhood offers a margin account, but should you use margin? We are going to answer some common questions about margin on Robinhood such as whether margin is good or bad, how margin works, what margin rates are, and the risks of margin.
Margin is neither good nor bad, it is simply a tool. It depends on how you use it that can make it good or bad for you. Having a margin account on Robinhood allows you to place trades for more money than you have in your account. A margin account gives you the ability to borrow money from Robinhood to either trade with or withdraw from your account.
Robinhood has margin rules and guidelines about how much money they are willing to loan you for each trade, the interest rate for the loan, how much money you have to put up first, and how you have to maintain your account. To even get a margin account on Robinhood, you have to apply for one. You also need a Robinhood Gold subscription and a minimum of $2,000 to qualify for margin.
Advantages of Margin Account vs. Cash Account on Robinhood
Having a margin account on Robinhood allows you to access advantages that you don’t get with just a regular cash account. In addition to being able to trade more money than you have, there are other advantages of having a margin account.
These advantages include the ability to become a day-trader, being able to trade all options strategies, being able to withdraw more cash than you have, and not having to worry about running into trade settlement violations. You don't have to do all these things in a margin account if you don't want to, but at least you have the ability, if you choose to.
Margin Requirements on Robinhood
Margin requirements are what determine how much money Robinhood is willing to let you borrow for each trade and for your account overall. Each broker is allowed to set their own margin requirements so if you want to use margin on Robinhood, you have to play by their rules. The margin requirement depends on the specific security you are trading. It’s important to note that Robinhood can change margin requirements at any time.
Robinhood does a great job with their margin requirements layout on their app. They make it extremely straightforward to see what the initial requirement is and what the maintenance requirement is for each stock. They also include what category of volatility they consider a stock and how much buying power you have for each stock based on the initial requirement. With some brokers, it’s difficult to find this information and it’s not presented in a user-friendly way so, Robinhood gets an A+ in this category.
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Buying Stocks on Margin on Robinhood
The easiest way to understand margin is by seeing real life examples. Let’s take a look at an example of using margin to buy a stock on Robinhood. You can follow along by referencing the screenshot below.
The stock we will look at is a name that is almost synonymous with Robinhood. That stock is Gamestop, symbol GME. Robinhood categorizes GME as a high volatility stock. With high volatility stocks, Robinhood is not going to loan you much money on margin to buy them. With low volatility stocks, Robinhood is willing to let you take more risk and therefore loan you more money to buy them.
The initial requirement to buy GME is 84%. This means Robinhood requires you to put up 84% of the value of the trade and the remaining 16% is what they will allow you to borrow from them. So, if you want to buy $10,000 worth of GME, you need to put up $8,400 and Robinhood will loan you the extra $1,600.
The maintenance requirement is 80%, which means in order to avoid a margin call, you need to maintain 80% equity of your GME value. So, if the value of your $10,000 of GME was to fall below $8,000 in value, then Robinhood would issue you a margin call. We will discuss more details on margin calls next.
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Margin Calls on Robinhood
As mentioned, a margin call is what happens when a specific stock or your whole portfolio falls below certain thresholds of equity value that Robinhood requires you to maintain. A margin call means that Robinhood is “calling” for you to increase the equity in your account by either depositing more cash or selling some of your stocks.
If you ever receive a margin call, you will want to act quickly because part of the margin agreement you sign says that Robinhood is allowed to liquidate stocks for you if you don’t meet your margin call fast enough. A margin call may sound scarier than it actually turns out to be in some cases if it is just a small amount or if you are actively watching your portfolio and can choose something to sell in time.
Margin Rate on Robinhood
The margin rate is the interest rate that Robinhood charges you for borrowing money from them. Robinhood has one of the most unique margin rate offerings in the brokerage industry. They currently charge a flat fee of 3% annual interest for borrowing any amount over $1,000.
Most brokers have a tiered margin rate system where you are charged a lower rate the more you borrow. For some of the larger brokers, you need to be borrowing $1,000,000+ in order to receive a rate as low as 3%. So, Robinhood’s margin rate is easily one of the most competitive in the industry and a great advantage of investing with them.
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Debit Balance
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Margin Interest Rate
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above $1,000
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4.25%
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|
below $1,000
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$5/month
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Best Margin Rates
See Broker Margin Rates Comparison
Robinhood Margin Account Final Thoughts
If you are going to open a margin account on Robinhood, start off small and slow. Learn the mechanics of margin on Robinhood by doing a few small trades until you get comfortable and then you can gradually increase your risk. Robinhood offers great resources to learn about margin so take the time to do your homework.
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Author: Updated on 4/6/2022.
Paul Johnson is a Licensed Stockbroker with 7+ years of experience in the financial services industry. Paul enjoys teaching about investing and writing about financial topics. He is a husband and father of twin boys.
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