Ditching the Leverage: A Step-by-Step Guide to Turning Off Margin on E*TRADE (and Why You Might Want To!)
Hey there, savvy investor! Ever found yourself wondering about the "margin" aspect of your ETRADE account and thought, "Maybe I should turn that off?" You're not alone! Many investors, especially those new to the game or those looking for a more conservative approach, find themselves in this exact spot. This comprehensive guide will walk you through exactly how to turn off margin on ETRADE, whether you want to completely convert to a cash account or simply disable margin investing while keeping a margin account type. Let's dive in!
Before we begin, let's understand why you might want to turn off margin in the first place. Margin trading, while offering the potential for amplified gains by using borrowed money, also significantly amplifies losses. You're essentially taking out a loan from ETRADE, and like any loan, it comes with interest charges and the risk of a "margin call" – a demand from your broker to deposit more funds to cover potential losses. If you can't meet a margin call, ETRADE can liquidate your positions without your consent, potentially at a significant loss. For many, the peace of mind and reduced risk of a cash account far outweigh the potential benefits of margin.
Step 1: Understanding Your Current Account Status and Why You're Making This Change
Alright, let's kick things off! Before you click any buttons or make any calls, take a moment to reflect. Why are you considering turning off margin? Is it due to:
Risk Aversion? You prefer not to take on the additional risk associated with borrowed funds.
Simplicity? You want a straightforward cash account where you only trade with your own money.
Interest Charges? You're tired of paying interest on your margin balance.
Avoiding Margin Calls? You want to eliminate the possibility of sudden demands for more funds.
Understanding your "why" will help solidify your decision and prepare you for the next steps.
What's the Difference: Margin vs. Cash Accounts?
It's crucial to distinguish between these two:
Margin Account: This account type allows you to borrow money from your brokerage (E*TRADE, in this case) to purchase securities. Your existing securities serve as collateral for this loan. You have "buying power" that is greater than your cash balance.
Cash Account: With a cash account, you can only trade with the funds you have available in your account. You cannot borrow money to invest, and thus, you avoid margin interest and margin calls. This is generally the default account type for new investors.
Step 2: Accessing Your E*TRADE Account (Online or Mobile App)
Now that you're clear on your reasons, let's get into the practical side. E*TRADE offers multiple ways to access your account.
Sub-heading: Via the E*TRADE Website (Recommended for Comprehensive Options)
Log In: Go to the official E*TRADE website (us.etrade.com) and log in to your account using your username and password.
Navigate to Account Settings: Once logged in, look for a section related to your account settings, profile, or preferences. This is often found under your name or an "Account" or "Profile" dropdown menu.
Look for options like "Account Settings," "My Profile," or similar. The exact wording might vary slightly due to website updates, but it will generally be in a prominent location once you're logged in.
Sub-heading: Via the E*TRADE Mobile App (Convenient, but May Have Limited Options)
Open the App: Launch the E*TRADE mobile app on your smartphone or tablet.
Log In: Enter your credentials to log in.
Find Account/Menu: Look for a "Menu" icon (often three horizontal lines or a "More" option) or an "Account" tab, usually located at the bottom or top of the screen.
Navigate to Settings: Within the menu or account section, search for "Settings," "Account Settings," or "Margin Management."
Step 3: Locating Margin Management or Account Type Conversion Options
This is where you'll find the specific controls for your margin account.
Sub-heading: Within Account Settings (The Most Common Path)
Look for "Investment Settings" or "Trading Preferences": Once in your account settings, scroll through the options. You're looking for something that relates to your investment capabilities or trading features.
Find "Margin Management" or "Account Type": Within these sections, you should see an option for "Margin Management," "Margin Investing," or perhaps even a direct link to "Change Account Type."
Some platforms might have a clear "Turn off margin investing" button or a "Request to switch to cash account."
Sub-heading: If a Direct Option Isn't Immediately Apparent
If you're having trouble locating a clear "Turn off margin" option, don't fret! E*TRADE, like many brokers, prefers you to understand the implications of such changes. You might need to:
Search the Help/FAQ Section: Many brokerage websites have extensive help centers. Search for terms like "margin account," "cash account," "disable margin," or "convert account type."
Look for "Upgrade Account" or "Change Account Type": Sometimes, the option to switch from a margin to a cash account is framed as an "upgrade" or "change" in account type.
Be careful not to accidentally "upgrade" a cash account to margin if that's not your intention!
Step 4: Choosing Your Desired Margin Status
You generally have two main approaches to turning off margin on E*TRADE:
Sub-heading: Option A: Disabling Margin Investing (Maintaining a Margin Account Type)
This option means your account technically remains a "margin account" in its classification, but you disable the ability to borrow funds for trading. You won't be offered leverage or credit. This can be useful if you might want to re-enable margin in the future without a full account conversion process.
Select "Turn off margin investing": If you see this specific option, choose it.
Confirm Your Decision: E*TRADE will likely ask you to confirm your understanding of the implications of disabling margin investing. Read any disclosures carefully.
Follow On-Screen Prompts: There might be a few more steps or a confirmation message.
Sub-heading: Option B: Requesting to Switch to a Cash Account (Recommended for Full De-Leveraging)
This is the most definitive way to eliminate margin. Your account will be reclassified as a cash account, meaning you can only trade with settled cash.
Select "Request to switch to cash account": This option makes a formal request to E*TRADE to change your account type.
Review Disclosures and Confirm: E*TRADE will present you with important information about converting to a cash account. This will include:
Any outstanding margin debit balances: You must pay off any money you've borrowed before you can convert to a cash account. E*TRADE will not allow the conversion if you have an active margin loan.
Pending trades: Ensure all trades have settled before initiating the conversion.
Restrictions on trading during conversion: Your account might be temporarily restricted from trading during the conversion period (which can take a few business days).
Submit Your Request: Follow the prompts to submit your request for account type conversion.
Step 5: Confirmation and Follow-Up
Once you've made your selection and confirmed, it's important to verify the change.
Look for Confirmation: E*TRADE usually sends a confirmation email or an in-app notification once your request is received.
Check Account Status: After a few business days (if converting to a cash account, as this often takes 2 business days), log back into your E*TRADE account.
For Option A (disabling margin investing): Verify that your "buying power" accurately reflects only your cash balance, and that no margin-related options are available for new trades.
For Option B (converting to a cash account): Your account type should now clearly state "Cash Account" in your profile or account overview.
Contact Customer Service if Needed: If you encounter any issues, don't see the expected changes within a reasonable timeframe, or have any questions during the process, it's always best to contact E*TRADE customer service directly.
Sub-heading: E*TRADE Customer Service Contact Information
Phone: You can typically find their customer service number on their website under "Contact Us" or in the "Help" section. A common number for E*TRADE support is 1-800-387-2331.
Secure Message/Chat: Many online brokers offer secure messaging or chat features within their platform. This can be a convenient way to get support.
Remember: Always verify contact information on the official ETRADE website to ensure you're speaking with a legitimate representative.*
Frequently Asked Questions (FAQs) about E*TRADE Margin Accounts
Here are 10 common "How to" questions related to E*TRADE margin and cash accounts, with quick answers:
How to Check if My E*TRADE Account is a Margin Account?
You can usually check your account type in your E*TRADE account summary or profile settings online or in the mobile app. It will typically be explicitly labeled as "Margin" or "Cash."
How to Pay Off a Margin Debit Balance on E*TRADE?
You can deposit additional cash into your E*TRADE account to cover the margin debit. This can be done via electronic funds transfer (EFT), wire transfer, or by depositing a check.
How to Understand Margin Calls on E*TRADE?
A margin call occurs when the equity in your margin account falls below E*TRADE's maintenance margin requirement. You will be notified and required to deposit additional funds or sell securities to bring your account back into compliance.
How to Avoid Margin Calls on E*TRADE?
The simplest way to avoid margin calls is to not use margin at all, or to use it very conservatively and maintain a significant cash buffer in your account beyond the minimum requirements.
How to Open a Cash Account on E*TRADE if I don't have one?
When opening a new account with E*TRADE, you typically choose your account type during the application process. A standard brokerage account will usually be a cash account by default unless you specifically apply for margin.
How to See My Buying Power on E*TRADE?
Your "buying power" (or "available to trade") is usually displayed prominently on your account summary or trading dashboard within the E*TRADE platform, showing how much you can invest.
How to Know the Interest Rate on My E*TRADE Margin Loan?
E*TRADE's margin interest rates vary based on your debit balance and can be found on their website, typically in the "Rates" or "Margin" section of their disclosure library.
How to Re-enable Margin on E*TRADE After Disabling It?
If you simply disabled margin investing (Option A above), you might be able to re-enable it through the same "Margin Management" section. If you converted to a cash account, you would likely need to re-apply for margin privileges, which involves a separate application and approval process.
How to Transfer Funds to My E*TRADE Account?
You can transfer funds to your E*TRADE account electronically via ACH (Automated Clearing House) transfer from your bank, wire transfer, or by depositing a check. These options are typically found under "Fund My Account" or "Transfers."
How to Close My E*TRADE Account Entirely?
To close your E*TRADE account entirely, you would typically need to contact their customer service directly. Ensure all positions are sold, and all funds are withdrawn or transferred to another institution before initiating the closure.