Interactive Brokers Review: Low Margin Rates Revealed

Interactive Brokers differentiates itself by delivering the lowest commissions and margin rates in the industry, making it a viable option for stock trading. In this Interactive Brokers review, we'll examine how the online stock broker stacks up against the major criteria we believe are critical to consider before creating an account. Learn more about the advantages and disadvantages below.

Comprehensive Interactive Brokers review

This stockbroker is well-suited for: Certain investors, and more typically, traders who trade on margin. Margin rates at Interactive Brokers easily outperform the competition.

Pros

• Advantages Margin rates are low

• A strong trading platform

• Trading without commissions

• Mutual funds with no transaction fees

Cons

• Difficult pricing structure

• Certain research tools are chargeable.

Consider the alternatives

If you prefer a less convoluted price structure and a smartphone-only experience, Robinhood's pricing and mobile trading are as straightforward as they get. The stockbroker charges no commissions on stocks, options, and exchange-traded funds (ETFs), and also provides access to cryptocurrencies. The disadvantage is that its margin rates are not as competitive as those of Interactive Brokers.

If you're not an active trader and don't use margin, Merril Edge's diversified offering rivals the finest brokers, making it a convenient one-stop-shop that's easier to use than Interactive Brokers. However, this is not the broker for you if you are looking for the lowest margin rates available.

Prices for commissions

Before we explore Interactive Brokers' price, it's critical to note that consumers can pick between two different pricing plans. The IBKR Lite plan offers commission-free trading but is limited in terms of features and has higher margin loan interest rates. The IBKR Lite plan gives a flat fee charge of $0.65 per contract for options trading. The IBKR Lite plan meets the needs of the majority of US investors.

On the other hand, the IBKR Pro plan includes additional features geared toward frequent and professional traders, as well as much cheaper margin lending rates. Unlike the majority of discount brokers, Interactive Brokers' commissions are variable, increasing in proportion to the size of the trade. The commissions charged by Interactive Brokers for IBKR Pro are mentioned in the table below. Additionally, IBKR Pro includes access to the business's SmartRouting order system, which the company says reduces trade pricing by $0.47 per 100 shares when compared to a conventional brokerage. As a result, while the platform does charge commissions, this may assist mitigate those costs.

Commissions on stocks, ETFs, and mutual funds

STOCK MARKETS AND ETFS

• Stocks and exchange-traded funds $0.005 per share (minimum $1), $0 on the IBKR Lite platform

MUTUAL FUNDS

• The lesser of $14.95 or 3% of the trade value (over 17,000 no-transaction-fee funds)

Options commission

OPTIONS PRICE

• $0.10 or more

• $0.05 to $0.09

• $0.05 or less

COMMISSION

• $0 per trade, $0.65 per contract

• $0 per trade, $0.50 per contract

• $0 per trade, $0.25 per contract

Purchase of mutual funds

While Interactive Brokers is geared for active stock traders, it does not neglect fund investors. It offers over 45,000 mutual funds, more than 17,000 of which are available without paying the firm's regular transaction cost.

Mutual fund assets under management

• More than 45,000

Mutual funds with no transaction fees

• More than 45,000

Trading Platform

Customers will discover that Interactive Brokers offers a variety of trading platforms that are tailored to the demands of both active traders and long-term investors. Its platform consistently receives positive feedback from active traders who value having access to a fully-equipped trading platform on their desktop.

The following are the platforms that Interactive Brokers offer:

Interactive Brokers' Client Portal: is a modern and user-friendly desktop trading interface. This is the simplest way for an investor to sign up for the site and place a transaction. However, all clients (both IBKR Pro and Lite) get access to all three.

TWS: is a fully-featured desktop trading platform that includes all of the capabilities (and more!) that investors have come to expect from desktop solutions. Fully customized, you can create the screen of your dreams. Its watch list feature can include an astonishing amount of information about each firm, ranging from its price-to-earnings ratio to the average number of days it takes a company to sell its inventory. TWS is brimming with screeners, stock option research tools, and backtesting possibilities.

Mobile platforms: Interactive Brokers also has a robust mobile application available for iOS and Android smartphones. The apps include real-time data streaming, graphing tools, and the capacity to execute even the most sophisticated trades from a mobile device. With access to over 135 global marketplaces, mobile users will discover that trading from the palm of their hand is completely unrestricted.

As long-term buy-and-hold investors, we may not utilize all of the bells and whistles available on a fully-featured trading platform. To be honest, the amazing capability given by its desktop platform, IB TWS, can work in favor of aggressive traders as well as against naive investors.

New investors looking for a decent stockbroker for beginners may be thrown off by the desktop platform's numerous moving components. Even the fundamentals might be intimidating, as the platform is designed to provide access to a diverse range of markets. For instance, after inputting the ticker symbol for a popular ETF, the website asked whether we wanted a quote for the stock, options, or futures contracts based on its value. It's straightforward to navigate, although new investors may become disoriented.

Margin rates at Interactive Brokers

Margin rates at Interactive Brokers are among the lowest in the market. The following table summarizes its margin rates by margin balance.

BALANCE OF MARGINS

• $0 - $99,999

• $100,000 - $999,9999

• $1,000,000 to $49,999,999

ACCOUNTS IBKR PRO

• 1.58%

• 1.08%

• 0.83%

IBKR LITE ACCOUNTS

• 2.58%

• 2.58%

• 2.58%

Margin lending is, without a doubt, Interactive Brokers' secret sauce. The majority of competing discount brokers charge two to three times as much as Interactive Brokers for margin loans. If the margin is a critical component of your trading or investment plan, the broker's low-interest rates may be reason enough to add it to your shortlist of brokers to choose from.

Margin rates fall as you increase your borrowing capacity, and IBKR Pro clients benefit from lower margin rates than IBKR Lite customers.

The preceding list demonstrates the brokerage's commitment to high-value accounts, financial specialists, and active traders. Few brokers post margin rates for sums more than $2 million to $5 million. The fact that Interactive Brokers announces margin rates on loans over certain sums speaks volumes about the service's quality from the start.

Additionally, Interactive Brokers gets kudos for employing an uncomplicated and straightforward technique for determining its margin interest rates. The brokerage adds a spread to the Federal Funds Effective Overnight Rate, but other brokers calculate interest charged to customers with a debit balance using their proprietary benchmark.

Customer support and service

Because Interactive Brokers is primarily an online brokerage, it lacks the branch network of many of the top retail discount broker firms. Nevertheless, it provides help 24 hours a day through phone, chat, or secure messaging via its account center.

This brokerage account is ideal for you if you meet the following criteria:

If you can relate to any of the above claims, Interactive Brokers should be on your shortlist of places to open a brokerage account.

• You want to keep your costs as low as possible. IBKR Pro is a compelling deal for customers who make frequent stock and options transactions and want premium pro-oriented features because of its low commissions. In addition, the no-commission IBKR Lite plan is ideal for less-active investors.

• You make use of margin. One of Interactive Broker's main advantages is its low margin rates. It's no wonder that Interactive Brokers has the most margin loans outstanding of any discount broker; the savings are simply too significant to pass up.

• You don't require assistance or extensive (and free) research. Interactive Brokers makes no apologies for catering to aggressive traders, financial professionals, and sophisticated individual investors, as evidenced by its a la carte paid research choices. The fact that the average client trades more than 300 times each year reveals a lot about the kind of traders and investors who use Interactive Brokers.