Investing

questrade margin interst rates too high?

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  • Apr 4th, 2015 2:20 pm
[OP]
Sr. Member
Nov 11, 2006
583 posts
99 upvotes

questrade margin interst rates too high?

Can someone clarify what is the interst rates on Questrade margin accounts?
As per their website, it looks like about 10.75% (3% prime + 7.75%). Isn't it too high? Can i use my personal line of credit for stock purchases?

Questrade link http://www.questrade.com/pricing/interest_rates.aspx

CAD Effective date USD Effective date
Current prime rate 3.00% September 9, 2010 3.25% December 17, 2008
Debit
(Payable by client for margin) CAD CAD RRSP USD USD RRSP
Under $100,000
debit balance CAD prime +3% CAD prime +7.75% USD prime +3% USD prime +7.75%
Over $100,000
debit balance CAD prime +2% CAD prime +7.75% USD prime +2% USD prime +7.75%
22 replies
Banned
Feb 17, 2007
3190 posts
202 upvotes
Those are applicable to registered accounts. Normally you can't borrow any funds within those account; however, sometimes the system screwed up and let you have negative cash balance. Then you will be charged those interest rates.
A normal margin account's interest rate is not that high at Questrade, but still higher than the big 5 brokerage firms.
High fee actively managed mutual funds are bad for your wealth.
Member
May 10, 2009
212 posts
87 upvotes
I am on Questrade currently and the last time I checked the interest rate was 3.25% + prime of 3%. I am on a Margin account though.
[OP]
Sr. Member
Nov 11, 2006
583 posts
99 upvotes
Projek9 wrote: I am on Questrade currently and the last time I checked the interest rate was 3.25% + prime of 3%. I am on a Margin account though.
Can you please give the link there u found these rates? I was looking and cant find them... Thanks,
Deal Addict
Mar 3, 2009
1401 posts
790 upvotes
Ottawa, ON
Gmax wrote: Can you please give the link there u found these rates? I was looking and cant find them... Thanks,
As far as I can see, they are the links that you posted
CAD Effective date USD Effective date
Current prime rate 3.00% September 9, 2010 3.25% December 17, 2008
Debit
(Payable by client for margin) CAD CAD RRSP USD USD RRSP
Under $100,000
debit balance CAD prime +3% CAD prime +7.75% USD prime +3% USD prime +7.75%
Debit balance under $100,000 for CAD (in unregisted account, non RRSP) is CAD prime + 3%.
Sr. Member
User avatar
Jun 27, 2007
579 posts
112 upvotes
Toronto
Hi Gmax,

I’m John from Questrade, and I’d be happy to help answer your question.

As ACC-Major and Projek9 have mentioned, the prime + 7.75% rate is only for debit balances within registered accounts such as your RRSP.

The rates for debit balances under $100,000 in a margin account are prime + 3% for both USD and CAD. For more information on our interest rates, please visit our website.

Let me know if you have any other questions.

John, Team Questrade
Questrade Inc.
Sr. Member
Dec 6, 2008
735 posts
251 upvotes
Winnipeg
Hi Questrade,

I was looking at opening a cash account with Questrade, but there is only margin account. Can I open a margin account but still pay stock purchases in full using cash or am I forced to use the margin?

Thanks
Deal Fanatic
User avatar
Jun 19, 2009
6112 posts
1975 upvotes
Scarborough
nonrefundable wrote: Hi Questrade,

I was looking at opening a cash account with Questrade, but there is only margin account. Can I open a margin account but still pay stock purchases in full using cash or am I forced to use the margin?

Thanks
You can fund the account with cash and never use the margin. You just have the option to use it but aren't forced to use the margin aspect of the account.
Deal Expert
User avatar
Dec 11, 2005
19763 posts
2510 upvotes
It would be nice to have a thread that had the margin interest rates of all the major discount brokers for comparison.

I know IB only charges 2% which is a HUGE difference. Don't know what TD charges, BMO, RBC, Scotia, QTrade.
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Sr. Member
User avatar
Jun 27, 2007
579 posts
112 upvotes
Toronto
Hi non-refundable,

As SkimGuy has mentioned, you can certainly open a margin account and just purchase stocks using cash. The margin is just there for you to use if you choose to buy on margin.

If you are looking to trade with only cash, you may want to consider using a tax free savings account, or as we like to call it, a tax free trading account. This way, you won’t be taxed on any of your capital gains and you can be assured that you are never trading on margin.


Let me know if you have any other questions.

John, Team Questrade
Questrade, Inc.
Sr. Member
Dec 6, 2008
735 posts
251 upvotes
Winnipeg
Thanks Questrade. If I will be opening an account, I'll be putting in more than the TFSA limit.
Newbie
Sep 28, 2013
7 posts
1 upvote
Ottawa
Questrade wrote: Hi non-refundable,

As SkimGuy has mentioned, you can certainly open a margin account and just purchase stocks using cash. The margin is just there for you to use if you choose to buy on margin.

If you are looking to trade with only cash, you may want to consider using a tax free savings account, or as we like to call it, a tax free trading account. This way, you won’t be taxed on any of your capital gains and you can be assured that you are never trading on margin.


Let me know if you have any other questions.

John, Team Questrade
Questrade, Inc.
Hi Questrade,

A friend of mine has opened a margin account, but the both of us can't figure out how to purchase stocks using just cash (without margin). He is using IQ Web. I tried looking for answers on help.questrade.com but I didn't find anything useful.

How can a margin account make a cash-only trade? What are the steps? Is there an article you could link to that would explain the process? Perhaps such an article does not exist on help.questrade.com and that's why I can't find it?

Thanks
Sr. Member
User avatar
Jun 27, 2007
579 posts
112 upvotes
Toronto
Hi cdbbrian,

In order to make a cash only trade within your margin account, ensure that the amount of the trade does not exceed the cash balance within your account. For example, if you have $1000 in your account and you place a trade for $1500, you will have purchased the difference on margin and your new cash balance will show -$500.

Alternatively, you can open up a tax free savings account, which will ensure all your trades are cash only. In addition, all capital gains within a TFSA are tax free.

Let me know if you have any other questions.

John, Team Questrade,
Questrade Inc.
Newbie
Sep 28, 2013
7 posts
1 upvote
Ottawa
Questrade wrote: Hi cdbbrian,

In order to make a cash only trade within your margin account, ensure that the amount of the trade does not exceed the cash balance within your account. For example, if you have $1000 in your account and you place a trade for $1500, you will have purchased the difference on margin and your new cash balance will show -$500.

Alternatively, you can open up a tax free savings account, which will ensure all your trades are cash only. In addition, all capital gains within a TFSA are tax free.

Let me know if you have any other questions.

John, Team Questrade,
Questrade Inc.
Hi Questrade,

That's what I thought was the default behaviour as well, but when we made an order first-hand, this is what we saw in the order summary: http://i.imgur.com/1LY7Gqh.png

The account has $1,000 in cash and the purchase order was for $976. But as you can see, the maintenance excess will only go down by $298 for this order. If and when the order does get processed, despite the maintenance excess only going down by $298, will my cash balance actually be charged for $976, and a margin will not be issued? (I should expect my cash balance to be $24)

My understanding is that margin interest will only be charged if my account goes to a negative cash balance (aka taking a margin), as in the example you gave.

My second question is: does the maintenance excess have any direct correlation to the cash that will be used in the transaction? Or is it only the required capital number (cash and/or net equities) used to calculate available buying power (buying power being both cash and margin combined)? Is it correct to assume that so long as I have cash to fully fund a transaction, that the cash will be used to fund it, before any margin is taken?

The account definitely has $1,000 in it: http://i.imgur.com/KRhZDgh.png

Thank you for taking the time to read my longer question!
Sr. Member
User avatar
Jun 27, 2007
579 posts
112 upvotes
Toronto
Hi cdbbrian,

Because the margin rate on eligible securities is typically 30%, when you make a purchase, your maintenance excess will decrease by 30% of the value of your purchase (excluding commissions). If your maintenance excess falls below zero, you will be in a margin call.

In your example, your maintenance excess would have fallen by 30% of your cash purchase value. You are correct that your remaining cash balance after the purchase would be $24 and you would not be using any margin. No margin is used on purchases until the cash balance falls below zero.

I hope this clarifies some of your questions, let me know if you have any others.

John - Team Questrade,
Questrade Inc.
Newbie
Sep 28, 2013
7 posts
1 upvote
Ottawa
Ah, that explains everything that I wished to know now. Thank you for the replies!
Deal Addict
Mar 16, 2015
1835 posts
309 upvotes
Reviving an old thread.

Want to know if margin interest rate of Prime +3.15% is competetive enough for Questrade.
How much other brokers like IB charge ?

Edit : Found from IB rate

It is Overnight lending rate ( which is .75%) + 1.5% = 2.25%

So how come so much difference - Questrade's 6% ( assuming prime is 2.85%) vs IB's 2.25% ?
Deal Fanatic
Jun 3, 2009
5433 posts
1283 upvotes
Montreal
CocoJambo wrote: Reviving an old thread.

Want to know if margin interest rate of Prime +3.15% is competetive enough for Questrade.
How much other brokers like IB charge ?

Edit : Found from IB rate

It is Overnight lending rate ( which is .75%) + 1.5% = 2.25%

So how come so much difference - Questrade's 6% ( assuming prime is 2.85%) vs IB's 2.25% ?
I'd like to know the same.

BMO IL charges 4.25% but Questrade's 6% is indeed too high...
Sr. Member
Oct 21, 2004
526 posts
90 upvotes
CocoJambo wrote: Reviving an old thread.

Want to know if margin interest rate of Prime +3.15% is competetive enough for Questrade.
How much other brokers like IB charge ?

Edit : Found from IB rate

It is Overnight lending rate ( which is .75%) + 1.5% = 2.25%

So how come so much difference - Questrade's 6% ( assuming prime is 2.85%) vs IB's 2.25% ?
you can negotiate it lower esp if you're bringing over sizable assets. Just ask them to guarantee the rate before you move your money in.

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