Are margin interest rates low at RBC Direct Investing?

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Are margin rates low at RBC Direct Investing?

Margin trading - borrowing money from your broker to buy more assets than you could otherwise afford - is popular, but it's not available at all brokers, and margin interest rates can vary widely.

RBC Direct Investing offers margin trading, but its margin rates aren't the best on the market. Read on for details or browse our toplist of margin trading platforms for cheaper alternatives.

RBC Direct Investing is not ideal for margin trading

András Régely

Investments • Stock Market • Market Analysis

Want to trade big with little money? I tested RBC Direct Investing's margin trading conditions for you using real money, and came away with mixed impressions:

RBC Direct Investing's margin rates are OK but far from the lowest on the market.
Stock and ETF trading fees at RBC Direct Investing are average.
Margin trading involves borrowing money from your broker to increase your exposure.
To find margin trading platforms with better conditions, check our toplist.

Before we begin, let's see if RBC Direct Investing is available in your country:

No, you can't open an account at RBC Direct Investing if you live in the United States!

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RBC Direct Investing

3.8/5

Minimum deposit

Stock fee

Average

Options fee

Average

Inactivity fee

Account opening

1-3 days

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RBC Direct Investing margin rates are average

So what are margin rates? Margin rates, sometimes called debit rates, refer to the interest rates charged by brokers when you borrow money to buy and sell stocks, ETFs (exchange-traded funds) or options on margin.

Each brokerage sets its own margin rates, but generally margin rates are closely tied to the benchmark interest rate of the currency in which you borrow. If your broker lends you USD, the margin rate will most often be the US interest rate plus a markup that the broker adds.

Brokers often have a tiered system for margin rates, depending on the amount you borrow: the more money the broker lends you, the lower the margin rate is. Some brokers also charge different margin rates for different types of trading accounts. Typically, a standard account will have higher rates than a premium account. The rates BrokerChooser quotes refer to standard accounts.

Most brokers calculate the margin rate on a daily basis, but the amount you owe them is charged to your account once a month. Brokers are required to disclose their margin rates; some do so citing an annual percentage rate while others will display it in swap points. Whichever it is, just keep in mind that margin rates can change rapidly without advance warning from your broker.

Margin rates at RBC Direct Investing
Broker	USD margin rate	USD margin rate class
RBC Direct Investing	9.5%	Average
Qtrade Direct Investing	9.0%	Average
Questrade	12.3%	High

Margin rates on short selling

Margin rates can also apply when you engage in short selling. Short selling means that you borrow shares from your broker and sell them with the expectation that the share price will decline. You will then repurchase the shares at a lower price, return them to the broker and pocket the price difference as your profit.

The margin rate for short selling is the interest rate charged by the broker on the borrowed funds used to facilitate the short sale. It is similar to the margin rates for simple stock, ETF or options trading.

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Stock trading fees are average

Margin rates are the single most important item that influences your margin trading profits, but trading fees and other regular or one-off charges can also impact your overall trading costs.

RBC Direct Investing has average stock and ETF trading fees overall. See details of this and other fees charged by RBC Direct Investing and some close competitors in the table below. (Trading fees cited here refer to a $2,000 trade.)

Stock trading fees and other charges at RBC Direct Investing
Broker	US stock fee	UK stock
RBC Direct Investing	$7.1	-
Qtrade Direct Investing	$8.8	-
Questrade	$5.0	-

Trading on margin

Trading on margin means borrowing money from your broker to buy stocks, ETFs or options. But why would you do that? Basically, it increases your 'buying power', allowing you to open larger trading positions than you could otherwise afford with just the cash in your brokerage account.

In order to trade on margin, you'll need to open a special account at your broker, typically simply called a margin account. You are also required to deposit a certain percentage of the total traded value as collateral, also known as the margin requirement. The remaining portion is funded by the broker.

Make sure you check the margin rates your broker applies, as higher rates can significantly impact your overall trading cost and erode your investment gains. For example, you may be happy with a simple stock investment that yields an 8% return over one year; probably less so if you borrowed money at 10% annual interest to finance that stock investment.

You also need to be aware of the risks associated with trading on margin, as any losses will also be magnified in the same way that gains are amplified.

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RBC Direct Investing margin rates