Margin Account vs. Cash Account

When you open a new brokerage account, you typically have a choice of a margin account or a cash account. While a margin account allows you to leverage borrowed funds for greater investing power, a cash account holds less risk overall. These two accounts work for different types of investors, with the right account ultimately depending on your risk tolerance and experience. These key considerations can help when comparing a cash account versus a margin account to choose the best type for your needs.

What are margin accounts?

A margin account uses cash borrowed from a broker-dealer so investors can use the funds to purchase securities.⁽¹⁾ The account serves as collateral for the borrowed cash, enabling you to trade securities such as stocks or options. Overall, a margin account allows for larger investments, but with that comes greater risk.

9 Excellent

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Boost your buying power with a SoFi® margin account

• Trade stocks, options, ETFs, mutual funds, alternative asset funds.
• $0 commission on stocks, ETFs and options, with no options contract fees.
• Access to a financial planner and automated investing.
• Invest, bank and borrow from a single user-friendly platform

Partner terms and conditions

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees.

Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRAwww.finra.org /SIPC(www.sipc.org).

There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options

Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser.

Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see https://www.sofi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information

Up to $1,000 in stock. Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SoFi Plus members can schedule an unlimited number of appointments with a financial planner during periods in which the SoFi Plus member meets the eligibility criteria set forth in section 10(a) of the SoFi Plus Terms and Conditions. SoFi members who are not members of SoFi Plus can schedule one (1) appointment with a financial planner. The ability to schedule appointments is subject to financial planner availability. SoFi reserves the right to change or terminate this benefit at any time with or without notice. Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov.

Robo Advisor:
Automated investing is offered through SoFi Wealth LLC, an SEC-registered investment adviser.
0.25% fee is based on your account value. The wrap program fee may cost more or less than purchasing brokerage, custodial, and record keeping services separately.

What is a cash account?

A cash account requires the funds up front before trading, and you cannot borrow funds from your broker.⁽¹⁾ However, some brokers offer limited margin in specific cases, such as for options trading in retirement accounts. With a cash account, you can trade a wide variety of investment types, including stocks, bonds, mutual funds, index funds, exchange-traded funds (ETFs) and, in some cases, cryptocurrency.

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Simplify Your Investments with a Public Cash Account

• Trade stocks, ETFs and options commission-free
• Earn rebates on options
• Lock in a 6.8% yield with a Bond Account
• Earn 4.1% APY with a High-Yield Cash Account

Margin accounts vs. cash accounts: Which is better?

Both margin accounts and cash accounts can be valuable tools for investors, but there are some cases where one might be better than the other. When comparing a margin account versus a cash account, these are some key considerations to help you determine which one is best for you.

• A margin account is better for leveraging larger positions. With a margin account, you can borrow funds to increase your purchasing power.
• A margin account is better for day trading flexibility. Day traders can take advantage of market changes in real time when they have access to the funds they need for short-term trading.
• A margin account is better if you want short-selling capabilities. A margin account is necessary for short-selling because it allows you to borrow shares from your broker.
• A cash account is better for lower risk. With a cash account, you do not have to worry about repaying a loan because you are using the funds you already have.
• A cash account is better for no interest charges. Since there is no loan, a cash account skips the interest charges and saves you money on your investment.
• A cash account is better for simplicity and new traders. A cash account deals in funds you have, so it is more approachable for beginners who are just learning how to invest.

Compare brokerage platforms

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Product	Finder Score	Available asset types	Stock trade fee	Minimum deposit	Cash sweep APY	Offer
Promoted Finder score 9 Excellent Wealthfront	Finder score 9 Excellent	Stocks, ETFs, High-yield cash account	$0	$500	4.00%	Get a $50 bonus when you sign up and fund a taxable automated investing account with at least $500.	Automate your stock and bond portfolio or trade individual stocks for as little as $1 apiece. Plus, earn 4% APY on your cash.	Go to site More info	loading
Promoted Finder score 9 Excellent SoFi Invest®	Finder score 9 Excellent	Stocks, Options, Mutual funds, ETFs, Alternatives	$0	$0	0.01%	Get up to $1,000 in stock when you open and fund a new account. T&C apply.	Trade stocks, ETFs, and options with zero commissions, invest in IPOs or automate your portfolio, with exclusive perks available through SoFi Plus.	Go to site More info	loading
Promoted Finder score 9 Excellent Public.com	Finder score 9 Excellent	Stocks, Bonds, Options, ETFs, Cryptocurrency, Investments, Retirement, Treasury Bills, High-yield cash account	$0	$0	4.1%	Get up to $10,000 and transfer fees covered when you move your portfolio to Public.	Build a diversified portfolio of stocks, bonds, options, ETFs and crypto, with a high-yield cash account and options contract rebates.	Go to site More info	loading
Finder score 7.2 Great OPTO	Finder score 7.2 Great	Stocks, ETFs	$0	$0	4%	Earn up to $300 when you deposit between $2,000–$25,000+.	Copy top-performing portfolios or build your own stock index on Opto's AI-driven thematic investing platform, and get 4% APY on your cash.	Go to site More info	loading
Finder score 9.4 Excellent Interactive Brokers	Finder score 9.4 Excellent	Stocks, Bonds, Options, Mutual funds, ETFs, Cryptocurrency, Futures, Forex, Treasury Bills, Precious metals	$0	$0	3.83% Lite 4.83% Pro	Trade a wide range of assets, with global market access and pro-grade trading tools.	Go to site More info	loading
Finder score 8.2 Great eToro	Finder score 8.2 Great	Stocks, Options, ETFs, Cryptocurrency, Futures, Investments	$0	$0	3.9%	No commission stock, ETF and options trades, with 3.9% interest on your options account balance and no options contract fees. See full disclosure.	Go to site More info	loading

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What is the Finder Score?

The Finder Score crunches 147 key metrics we collected directly from 18+ brokers and assessed each provider’s performance based on nine different categories, weighing each metric based on the expertise and insights of Finder’s investment experts. We then scored and ranked each provider to determine the best brokerage accounts.

We update our best picks as products change, disappear or emerge in the market. We also regularly review and revise our selections to ensure our best provider lists reflect the most competitive available.

Read the full Finder Score breakdown

Bottom line

Deciding between a cash account and a margin account depends on factors like your investment goals, financial standing and experience level. While a cash account lowers your risk, margin accounts allow you to potentially grow your investments faster with borrowed capital.

To get started, compare the best brokerage accounts to find one best suited to your investment goals.

Frequently asked questions

Can I switch from a cash account to a margin account?

Yes, many brokers, like Interactive Brokers, allow you to switch from a cash account to a margin account so you can invest at your own pace.⁽⁵⁾

Can you have both a cash account and a margin account?

It depends on your brokerage, but most will allow you to have both a cash account and a margin account at the same time, so you do not have to choose between the two.⁽¹⁾

To make sure you get accurate and helpful information, this guide has been edited by Holly Jennings as part of our fact-checking process.

Written by

Lena Borrelli

Contributor

Lena Borrelli is an experienced finance writer with a deep understanding of personal finance, investing and consumer banking. Her work has been featured in top-tier publications such as Forbes, TIME, Bankrate, Moneywise and Annuity.org, where she provides expert insights on financial trends, smart money management and emerging fintech solutions. With a background in personal finance and content strategy, Lena specializes in breaking down complex financial topics into clear, actionable advice for readers. When she is not writing or scanning the news for the latest headlines, she is happiest spending time in the Florida sunshine with her husband and two pups. See full bio