Cash Account vs Margin
An account where every purchase is paid for in full, no borrowing. Borrowing from your broker to buy securities, using the account as collateral.
What is the difference between Cash Account and Margin?
Cash account = no leverage and no shorting. Margin account = both are available, plus interest costs and margin calls.
| Cash Account | Margin | |
|---|---|---|
| In one line | An account where every purchase is paid for in full, no borrowing. | Borrowing from your broker to buy securities, using the account as collateral. |
| Example | $10,000 in a cash account buys exactly $10,000 of stock. Losses are limited to what you put in. | With $10,000 cash you can buy $20,000 of stock on margin. A 10% rise turns $2,000 profit into a 20% return on your money; a 10% fall is a 20% loss - before interest. |
| Unit | Positions & Trade Mechanics | Positions & Trade Mechanics |
| Series 65 | Section 3: Client Strategies | Section 3: Client Strategies |
What is Cash Account?
The default brokerage account type. No leverage, no shorting, and no borrowing against holdings. Trades must settle with available cash, and buying with unsettled funds can trigger a good-faith violation.
What is Margin?
Margin is credit extended by a broker, secured by the securities in the account. It is not a position type - it is a funding method. Buying on margin magnifies both gains and losses, and the broker charges interest on the borrowed balance. Under Reg T, an investor can typically borrow up to 50% of the purchase price of a marginable stock.