I will be getting a Scottrade margin account in a few days

Question

and have read over the agreements but i still have a few questions. The interest rate is 8.75 percent for amounts up to 10,000. Is that 8.75 percent on a monthly or a yearly rate? Secondly if I just use my cash and never use the margin will I still be charged the interest? When i had my cash account I would invest all my cash now I have to leave 2,000 dollars idle? So if my margin account is 40,000 and i don't wish to employ the 20,000 margin I can only invest up to 18,000 in cash?

Answer 1

A. Annual Rate

B. Zecco was rated the worst broker by Barron's this year. Scottrade was in the "middle of the pack".

C.  If you don't use margin you won't be charged.

D.  Margin helps you avoid the problem of "settlement".

E.  Check with Scottrade... but you should have full access to your "cash" account.

F.   Don't invest in anything until you have a better understanding of what you're doing.  Your ignorance can become very costly.

Answer 2

The rate is an annual rate, but you will be charged daily on the balance. If you never borrow, you will not be charged anything. The rate is variable, by the way. It can be lower or higher next week.

Answer 3

Great Answer Common Sense, two thumbs up!!

Answer 4

That is a yearly rate but it is computed daily on your debit balance and charged to the account monthly,

Interest rate that you were given was for the margin account, if you do not use it there will be no interest HOWEVER you can not run a debit in your cash account, if you do the firm has every right to charge you interest.

You do not have to use the margin account, you can do transactions in your cash account, Most investors do not use their margin account if they don't have to.

If you have 40,000 cash in a margin account you can buy $20,000 worth of securities, in fact you can buy up to 80,000 of marginable securities. The $2000 rule is the minimum equity not balance, you must have in a margin account. You don't keep $2000 idle

Based on your questions, you should not buy on margin or even use your margin account until you have a better understand of margins.