Should I Pay Margin Interest For 3 Days?

jack12 | Oct 27, 2022 | 307 posts since 2021

I am going to be about $8350 short of maxing out the ally promo for the 1% bonus

My CD matures on the 5th which is a Saturday

My margin rate is roughly 11.5% at fidelity

My question is would it make sense to pay 3 days interest which I figure is about $8 in order to make an extra $83.50?

A 3 month treasury would pay about 3.33% so the ally base rate is roughly 1% less on an annual basis

Seems like the answer is yes but could I get a 2nd opinion from someone who doesn't have untreated A.D.D?

I get roughly $83 less $8 and less about $21 for allys lower rate

So $83-8 and -21=+54 for paying the margin interest.

Does that sound right

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Answers

111 | Oct 31, 2022 | 672 posts since 2019

Here's another idea. Funds have to be in your Ally account by 11/4/22 to qualify for the Ally promotion. If I understand correctly, your situation is that you have a CD containing enough money to cover the final $8,350, but that CD matures on 11/5/22?

I'm assuming that you configured your CD when you started it to have interest reinvested. Has this CD paid (not merely accrued) enough interest to equal or come close to that $8,350? If so, can you ask the FI where you bought that CD to quickly strip off that amount of interest (but no principle, therefore no early withdrawal penalty), and place it in a liquid account?

You didn't say at which FI the CD is held. If it's also Ally, and they'll do this, the logistics become simple. If it's a different FI, you might have to scramble to make the 11/4/22 deadline.

Finally, here's another option. It used to be that some FIs would make customers a “CD-secured loan”, using the customer's CD at that FI as collateral and charging 2-3% over the rate paid on the CD. If they'll do that for you for such a short-term loan, that interest rate may be less than Fidelity's 11.5%.

Your own solution re. a Fidelity margin loan may be fine. I haven't used margin at Fidelity for a while, 10 years anyway, so I don't know about their current procedures, add-on fees (if any), etc. I assume you've investigated all that.

jack12 | Nov 1, 2022 | 307 posts since 2021

I have not had margin debt in over 20 years except for a few cents by mistake here and there

But my account clearly states the cash I have and the cash I have available including margin so I presume I could just transfer out the needed $ on Friday and then put it back on Monday

I'm pretty sure the CD does not have that much accrued interest and I am not sure I could get it as I have never tried that

But I just might not bother with it

jack12 | Oct 27, 2022 | 307 posts since 2021

I mistyped the rate for a 3 month treasury- it would be about 4.11% which might bring the $21 up to about $32

Still $83 less $8 and less $32=+$43

Choice | Oct 27, 2022 | 937 posts since 2020

Is a margin call reflective of an overdraft situation or adversely affect credit?

jack12 | Oct 31, 2022 | 307 posts since 2021

Its not a margin call i would just be borrowing $7056 as i sold a little something its not going to affect my credit

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