How margin interest works
Margin interest is charged daily on your borrowed balance and posted to your account monthly. Brokers compute it as: (Balance × Annual Rate × Days) ÷ 360 — note the 360-day year, a holdover from bond math.
Why broker rates matter
Margin rates vary enormously across brokers. As of 2026, a typical retail account at Schwab pays around 11-12% on small balances, while Interactive Brokers charges roughly 6-7%. On a $100K balance held for a year, that's a $4,000-$5,000 difference. If you carry meaningful margin, comparing rates is one of the highest-ROI things you can do.
Tiered rates
Most brokers offer tiered margin — bigger balances get lower rates. Schwab, for example, drops the rate as you cross $25K, $100K, $250K, and so on. Always confirm which tier your balance qualifies for.
- This tool uses simple interest with a 360-day convention, matching standard broker practice.
- Compounding effects within a single month are minimal — most brokers post interest monthly.
- Margin interest may be tax-deductible against investment income — consult a CPA.