What’s margin withdrawal? | Robinhood

What’s margin withdrawal?

If you’ve enabled Margin investing, you can also turn on Margin withdrawal to use margin for day-to-day spending and withdrawals. With margin, you can borrow money by using your portfolio as collateral. Investors usually use margin to borrow money for more investments, but you can also withdraw the funds as cash.

Benefits

The following are some of the potential benefits of using margin for cash.

  • Diversification: Diversifying your portfolio to withstand volatility may help manage margin risks.
  • Stay invested: Access cash without having to sell investments and avoid the potential tax consequences of selling securities.
  • Access to additional cash: Withdraw margin as cash to your linked bank account or instantly to your spending account.
  • Competitive rates: Borrow at 6.75% or as low as 5.70%.
Example

Let’s say you have $5,000 of uninvested cash in your account, and you decide to buy $5,000 of marginable MEOW stock. Then you decide you want to buy a $1,000 computer. You can borrow $1,000 against the $5,000 of MEOW stock in your portfolio to complete the purchase and have a $1,000 margin balance.

Risks

To ensure margin is right for you, it’s important to consider other options, for example:

  • The type of purchase you want to make, utilizing other loan types or lines of credit.
  • Whether lower interest rates or more favorable terms are available to you via other lenders.
  • Whether your cash needs warrant taking on the additional risks of margin withdrawals.

A few risks to consider:

  • Margin maintenance: You must maintain a minimum portfolio value (excluding crypto). In a falling market that negatively impacts your portfolio, this could lead to amplified losses.
  • Margin call risk: If your portfolio falls below the margin maintenance requirement, you must deposit more funds or sell securities to bring it back to the required level, or risk having your position(s) liquidated, without notice.
  • Interest rates could increase in the future: You must also pay margin interest monthly as well as planning how to pay back principal.
Keep in mind

Crypto positions can’t be traded on margin. They aren’t accounted for in your portfolio value because crypto aren’t securities, and they’re custodied with our affiliate, Robinhood Crypto, LLC.

FAQ

Can I earn interest with a margin balance?

If you don’t borrow money by spending on margin, you can earn interest on your uninvested brokerage cash that’s swept to our network of program banks. If you borrow money by spending on margin, you won’t have any uninvested brokerage cash left in your account to sweep to banks, so you won’t earn any interest.

What if my account drops below the minimum equity requirement?

If you’re borrowing money, we’ll generally decline transactions that would take your account below the $2,000 equity minimum. An exception to this is if you have a transaction that results in a different amount than initially authorized (such as a tip at a restaurant or a gas purchase that exceeds the hold placed by the gas station). If this is the case, your account could fall below the $2,000 equity minimum, potentially resulting in a minimum equity call.

What causes a margin call?

We’ll generally deny any authorization that puts your account into a margin call. An exception is an unauthorized transaction (such as a tip that exceeds the amount authorized). If this happens, it might cause a margin call.

Margin calls can also happen for other reasons, such as a decline in the value of your holdings, ACH reversals, or options assignments—causing your portfolio value (excluding crypto) to fall below your margin maintenance requirement. If you get a margin call, you need to bring your portfolio value back up to your minimum margin maintenance requirement, or you risk Robinhood having to liquidate your positions.

Do withdrawals affect the daily trade limit?

Yes. In addition to trading activity, your intraday withdrawals will affect your day trade limit, which is issued at the beginning of each trading day.

Disclosures

Margin borrowing increases your level of market risk and, as a result, has the potential to magnify both your gains and losses. Before using margin, customers must determine whether this type of strategy is right for them given their investment objectives and risk tolerance. Regardless of the underlying value of the securities you purchased, you must repay your margin loan. Robinhood Financial can change its maintenance margin requirements at any time without prior notice. If the equity in your account falls below the minimum maintenance requirements (varies according to the security), you’ll have to deposit additional cash or acceptable collateral. If you fail to meet your minimums, Robinhood Financial may be forced to sell some or all of your securities, with or without your prior approval. For more information, review FINRA’s Investor Alert and Robinhood Financial’s Customer Relationship Summary, Margin Disclosure Statement, and Margin Agreement. These disclosures contain important information on Robinhood Financial’s products and services, conflicts of interests, lending policies, interest charges, and the risks associated with margin investing enabled accounts. Robinhood Gold is an account offering premium services available for a subscription fee. Not all investors will be eligible to trade on margin. Margin involves the risk of greater investment losses. Additional interest charges may apply depending on the amount of margin used.

Robinhood Financial charges a margin interest rate that varies depending on your settled margin balance and the upper bound of the Target Federal Funds Rate, which is set by the Federal Reserve and is subject to change without notice. The formulas used to calculate the margin interest rate are subject to change at Robinhood Financial’s discretion. The variable margin rates are as of May 20, 2024 and might change at any time without notice and at Robinhood Financial’s discretion.

Examples listed are for illustrative purposes only. They aren’t a recommendation of a security or investment strategy.

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RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). Review a list of RHC licenses for more information.The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Review a list of our licenses for more information. Credit card products are offered by Robinhood Credit, Inc. ("RCT") (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

RHF, RHY, RHC, RCT, and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC, RCT, and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC isn’t a member of FINRA and accounts are not FDIC insured or protected by SIPC.

RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

Robinhood, 85 Willow Road, Menlo Park, CA 94025.© 2024 Robinhood. All rights reserved.