What is a negative margin balance?

Margin balance allows investors to borrow money, then repay it to the brokerage with interest. A negative margin balance or margin debit balance represents the amount subject to interest charges. This amount is always either a negative number or $0, depending on how much an investor has outstanding.

What is a negative gross profit margin?

A company's gross profit is its revenue minus its cost of goods sold, which include the costs of direct labor and direct materials. Gross profit margin is calculated by dividing gross profit by a company's revenue. If a company experiences a sudden decline in revenue or an increase in costs of goods sold, a negative gross profit margin can result.

What is a margin debit balance?

Trading stocks and other securities on margin allows investors to expand their purchasing power, though the availability of margin is predicated on the holdings an investor has in the first place. Accordingly, when an investor uses the brokerage’s funds to buy securities, this results in a margin debit balance.

How much does a margin balance affect interest rates?

Meanwhile, traders who maintain lower margin balances tend to pay higher interest rates. So, an investor with less than $25,000 in their account might pay 7%-8% for margin rates while an investor with over $1 million in their account might pay 4%-5% instead.