Have you found yourself with an E*TRADE margin account, perhaps opened unintentionally or simply no longer serving your investment strategy? Many investors gravitate towards margin accounts for the leverage they offer, allowing them to potentially amplify returns. However, the amplified risk and ongoing interest charges can quickly outweigh the benefits if not managed carefully. If you've decided that a margin account isn't the right fit for your current financial goals, you're in the right place!
This comprehensive guide will walk you through the process of turning off margin on your E*TRADE account, effectively converting it to a cash account or at least minimizing your margin exposure. While "turning off" margin entirely often involves a complete account type change, we'll cover the practical steps to achieve a similar outcome, focusing on how to eliminate margin debt and avoid future margin use.
Let's get started on regaining full control over your investments and simplifying your trading!
Understanding Your E*TRADE Margin Account
Before we dive into the steps, it's crucial to understand what a margin account entails. A margin account allows you to borrow money from E*TRADE (your broker) to purchase securities. This borrowed money is called a margin loan, and the securities in your account act as collateral.
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| How To Turn Off Margin On Etrade |
Why You Might Have a Margin Account (Even Unintentionally)
Default Setting: Sometimes, when opening a new brokerage account, the margin feature might be pre-selected or easily enabled without a full understanding of its implications.
Access to Advanced Trading: Certain trading strategies, like short selling or advanced options strategies, require a margin account. You might have enabled it for these purposes at one point.
Increased Buying Power: Margin offers increased purchasing power, allowing you to control a larger position with less of your own capital. This can be appealing, but it comes with significant risks.
The Risks and Responsibilities of a Margin Account
Amplified Losses: While margin can amplify gains, it equally amplifies losses. You can lose more money than you initially invested.
Margin Calls: If the value of the securities in your account declines significantly, E*TRADE may issue a "margin call," requiring you to deposit additional funds or securities to meet the minimum equity requirements. Failure to do so can result in the forced liquidation of your assets, often at unfavorable prices.
Interest Charges: You are charged interest on any borrowed funds. These interest rates can vary and impact your overall returns.
Liquidation Rights: E*TRADE has the right to sell your securities without prior notice if your account falls below required maintenance margin levels, even if it's against your wishes, to cover the margin loan.
Step 1: Assess Your Current Margin Status and Account Holdings
The very first and most crucial step is to understand your current situation. This is where you engage directly with your ETRADE account to gather vital information.*
1.1 Log In to Your E*TRADE Account
Go to the official ETRADE website (
www.etrade.com Securely log in using your User ID and Password.
QuickTip: Every section builds on the last.
1.2 Locate Your Account Summary/Portfolio
Once logged in, navigate to your "Accounts" or "Portfolio" summary. This section typically provides an overview of your holdings, balances, and account types.
Look for indicators of margin: You might see terms like "Margin Balance," "Margin Loan," "Available for Margin Trading," or "Net Liquidating Value" which would indicate you have margin enabled.
Note down your current margin balance (if any) and the value of your securities. This will give you a clear picture of how much you owe.
1.3 Identify Marginable Securities
Review your current holdings. While most widely traded stocks and ETFs are marginable, some securities may not be.
Determine which of your positions are currently using margin. This information might be available in a detailed portfolio view or by reviewing your trade confirmations.
Step 2: Eliminate Your Margin Debt
This is the most critical step to "turning off" margin. As long as you have an outstanding margin loan, you are actively using margin.
2.1 Deposit Additional Funds
The most straightforward way to eliminate margin debt is to deposit enough cash into your E*TRADE account to cover the outstanding margin loan.
How to do it:
Navigate to the "Transfer" or "Deposit" section of your E*TRADE account.
Choose your preferred method:
Electronic Funds Transfer (EFT): Link an external bank account and initiate a transfer. This usually takes 1-3 business days.
Wire Transfer: A faster option, often same-day, but may incur fees from your bank.
Check Deposit: You can deposit a check via mobile deposit or mail.
Ensure the amount you transfer is sufficient to bring your margin balance to zero or convert any "debit balance" to a positive cash balance.
2.2 Sell Securities (If Necessary)
If you don't have enough available cash to deposit, or if you prefer to reduce your investment exposure, you can sell securities in your margin account.
Prioritize selling non-performing assets or those you no longer wish to hold.
Be mindful of capital gains/losses when selling securities. Consult with a tax professional if you have questions about the tax implications.
The proceeds from the sale will be used to pay down your margin loan.
2.3 Monitor Your Margin Balance
After depositing funds or selling securities, continuously monitor your account to ensure the margin debt has been paid off.
Your "Margin Balance" or "Debit Balance" should reflect $0 or become a positive cash balance.
Step 3: Contact E*TRADE to Change Account Type (Optional but Recommended for Full Conversion)
While paying off your margin debt effectively stops you from using margin, your account type might still be designated as a margin account. To formally "turn off" margin and prevent accidental future use, you should contact E*TRADE directly.
QuickTip: Revisit this post tomorrow — it’ll feel new.
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3.1 Prepare for the Call
Have your E*TRADE account number ready.
Be prepared to explain your request clearly: you want to change your account from a margin account to a cash account.
Understand that converting to a cash account may have implications for certain trading activities, such as short selling or certain options strategies.
3.2 Reach Out to E*TRADE Customer Service
Phone: This is often the most efficient way to resolve account type changes. Find E*TRADE's customer service phone number on their website (usually in the "Contact Us" or "Support" section).
Secure Message/Chat: Some brokers allow account modifications through their secure messaging portal or online chat. Check if E*TRADE offers this for account type changes.
Be patient, as this process might require some back-and-forth and internal processing by ETRADE.*
3.3 Confirm the Account Type Change
After speaking with E*TRADE, ask for confirmation that your request has been processed or is in progress.
Follow up if you don't see the change reflected in your account within a few business days. E*TRADE should send you a confirmation (electronic or physical) once the account type is successfully changed to a cash account.
Step 4: Adjust Your Trading Habits (Post-Margin)
With margin "off" (either by paying down debt or converting to a cash account), your trading approach will naturally shift.
4.1 Understand Cash Account Restrictions
No Borrowing: You can no longer borrow funds for investments. All trades must be made with settled cash.
Settlement Periods: Be aware of settlement periods for trades. For most securities, the settlement period (T+1 for equities, T+2 for bonds/mutual funds) means that funds from a sale won't be immediately available for new purchases. Trading with unsettled funds in a cash account can lead to "good faith violations."
Familiarize yourself with ETRADE's specific cash account rules to avoid accidental violations.*
4.2 Re-evaluate Your Investment Strategy
If your previous strategy relied heavily on leverage, you'll need to adapt.
Focus on cash-based strategies, long-term investing, or options strategies that don't require margin (e.g., covered calls if you own the underlying stock).
Consider setting up alerts or notifications within your E*TRADE account to track your cash balance and avoid overspending.
Frequently Asked Questions (FAQs)
Tip: Rest your eyes, then continue.
How to check if my E*TRADE account is a margin account?
You can typically check your account type by logging into your E*TRADE account and navigating to your "Account Summary" or "Profile" settings. Look for terms like "Account Type" or "Margin Status." If you see a "Margin Balance" or "Debit Balance," it's likely a margin account.
How to pay off my margin loan on E*TRADE?
You can pay off your margin loan by depositing sufficient cash into your E*TRADE account via electronic funds transfer (EFT), wire transfer, or check deposit. Alternatively, you can sell securities in your account, and the proceeds will be used to cover the loan.
How to convert my E*TRADE margin account to a cash account?
First, you must pay off any outstanding margin debt. Once your margin balance is zero, contact E*TRADE customer service via phone or secure message and request to convert your account type from margin to cash.
How to avoid a margin call on E*TRADE?
To avoid a margin call, always maintain sufficient equity in your account, ideally well above the maintenance margin requirements. Monitor your positions regularly, avoid excessive leverage, and be prepared to deposit additional funds if your account value declines.
How to know the interest rate on my E*TRADE margin loan?
ETRADE's margin interest rates are typically tiered based on the size of your margin loan. You can find their current margin interest rates on the ETRADE website, usually in the "Rates & Fees" or "Margin" section. The specific rate for your account will also be reflected on your statements.
QuickTip: Look for patterns as you read.
How to prevent future margin usage after paying off the loan?
Even after paying off your margin loan, if your account is still technically a margin account, you could accidentally use margin again. The best way to prevent future usage is to formally convert your account to a cash account by contacting E*TRADE customer service.
How to deal with unsettled funds after selling securities in a cash account?
In a cash account, funds from security sales need to "settle" (typically T+1 for stocks). You cannot immediately use these unsettled funds for new purchases without incurring a "good faith violation." Plan your trades accordingly or wait for funds to settle before reinvesting.
How to understand E*TRADE's "Available for Withdrawal" vs. "Purchasing Power" after removing margin?
In a cash account, "Purchasing Power" will generally be equal to your "Cash Available for Withdrawal" or "Settled Cash." With a margin account, purchasing power is typically much higher than your cash balance due to the leverage. After removing margin, these numbers will align, reflecting only your available cash.
How to re-enable margin on E*TRADE if I change my mind later?
If you've converted to a cash account, you would typically need to re-apply for margin privileges through E*TRADE. This often involves reviewing disclosures, meeting financial requirements, and getting approval.
How to find E*TRADE customer service contact information?
You can find E*TRADE's customer service contact information, including phone numbers and options for secure messaging, on their official website, usually under the "Contact Us" or "Support" sections.
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