With interest rates at all-time lows, some brokers are passing savings on to their retail investor base in the form of lower margin rates. This is great, allowing you to more cheaply leverage your portfolio. I won’t bore you with an unnecessary primer on what margin is; if you landed here, you likely already know. Let’s get right into a comparison of the investing brokers with the lowest margin rates.
Disclosure: Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.
Comparing Margin Rates of Major Brokerages
Below is a table comparing the margin rates of all the major brokers, assuming a margin loan of $100,000. Some brokers offer tiered rates that decrease slightly as your loan balance increases. I chose to compare $100,000 because that was the median tier in most of the rate tables of these brokers. Rates were taken directly from the broker’s website.
So basically we’re down to M1 Finance and Interactive Brokers for the lowest margin rates. Both are solid choices in terms of commission-free investing. Let’s compare some of the nuances.
Unfortunately, the Interactive Brokers interface is very bad and downright unintuitive and confusing, especially for a beginner investor. Interactive Brokers is definitely only suitable for sophisticated, seasoned investors and traders. Here’s their interface:
The interface for M1 Finance, on the other hand, is extremely simple and intuitive:
IB’s customer service is not horrible but not great. Customer service from M1 is comparable. Interactive Brokers also doesn’t provide access to an integrable checking account like you can with M1 Finance via M1 Spend.
Perhaps the most important difference though is the fact that margin from Interactive Brokers can only be used to leverage your portfolio with them (i.e. buy more securities), whereas a margin loan from M1 Finance can be used for whatever you want – refinancing higher-interest debt, major purchases, unexpected expenses, etc. – it’s essentially just a low-interest collateralized loan.
M1 also offers fractional shares, zero transaction fees, zero account fees, and dynamic rebalancing.
M1 Finance is actually currently offering a 1-year free trial of M1 Plus (gets you 2% margin, 1% APY and 1% cash back, and access to Smart Transfers) for users who sign up before January 31, 2021, a $30 bonus for new users who fund their account with $1,000 or more during the month of January 2021, and a transfer promotion bonus for up to $3,500 when transferring an existing account from another brokerage, as outlined below:
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.