What a margin account is and why you might want one

A margin account at Fidelity lets you borrow money from the brokerage to buy securities — stocks, bonds, ETFs, and other investments. The borrowed money is called a margin loan, and you pay interest on it. A standard cash account, by contrast, only lets you trade with money you have already deposited.

Margin accounts are useful if you want to buy more securities than your cash balance allows, or if you want to short-sell (bet that a stock price will fall). They also let you use a strategy called buying on margin, where you put down a percentage of the purchase price and borrow the rest. The tradeoff is that margin accounts carry real risk: if your investments drop in value, you can owe more than you invested, and Fidelity can force you to sell positions to cover the loan.

Opening a margin account does not automatically put you into debt. You control whether you actually borrow. Many people open one and never use the margin feature, keeping it available if they need it later.

Key Takeaways

  • You must have an existing Fidelity brokerage account and meet minimum requirements — typically $2,000 in account value — before you can open a margin account.
  • Fidelity will ask you to read and sign a margin agreement that explains the risks, including the possibility of losing more than you invested.
  • Once approved, you can borrow up to 50 percent of the value of marginable securities in your account, though Fidelity may set lower limits based on your account history.
  • Interest rates on margin loans vary and are published on Fidelity's website; you pay interest only on the amount you actually borrow.
  • A margin call occurs when your account value drops below Fidelity's maintenance requirement, and you must deposit cash or sell securities to bring it back up.

Minimum requirements before you start

Fidelity requires a minimum account balance of $2,000 to open a margin account. This is a federal requirement set by the Financial Industry Regulatory Authority (FINRA), not a Fidelity-specific rule. The $2,000 must be in cash or securities already in your account — you cannot count a pending deposit.

You must also have an active individual or joint brokerage account with Fidelity. If you only have a retirement account (IRA, 401(k), or similar), you cannot use margin in that account. Margin is available only in taxable brokerage accounts.

Fidelity may also review your account history and trading experience. If your account is very new or you have had compliance issues, Fidelity may deny the request or require you to wait a set period before reapplying.

How to request a margin account through Fidelity's website or app

Log into your Fidelity account online or through the mobile app. Go to Account Settings (usually found in the menu or profile section). Look for an option labeled "Account Features," "Upgrade Account," or "Margin Account" — the exact wording varies by platform version.

Click the option to add margin. Fidelity will show you a summary of what margin is, the risks involved, and the interest rates currently in effect. You will be asked to read and electronically sign a margin agreement. This agreement is a legal document that explains your obligations and Fidelity's rights, including the right to liquidate your positions without notice if your account falls below maintenance requirements.

After you sign, Fidelity typically approves the request within one business day. You will receive a confirmation email, and your account status will change to show that margin is now available. You can then use margin features immediately.

Understanding margin requirements and how much you can borrow

The amount you can borrow depends on the value of securities in your account and Fidelity's margin requirements. Under FINRA rules, you can borrow up to 50 percent of the current market value of marginable securities. This means if you have $10,000 in may be able to access stocks, you can borrow up to $5,000.

Not all securities are marginable. Stocks and most ETFs are marginable, but penny stocks, some mutual funds, and newly issued securities often are not. Fidelity publishes a list of marginable securities on its website, and the trading platform will flag which holdings can be used as margin collateral.

Your maintenance requirement is the minimum account value you must keep at all times. FINRA sets a floor of 25 percent, but Fidelity often requires 30 percent or higher depending on the securities you hold. If your account value drops below this level, you trigger a margin call and must deposit cash or sell securities to bring it back up. Fidelity can force liquidation of your positions without your permission if you do not meet a margin call within the required timeframe (usually same business day).

Interest rates and fees on margin loans

Fidelity charges interest on the amount you borrow, calculated daily and posted to your account monthly. The rate varies based on how much you borrow and current market conditions. Fidelity publishes its margin interest rates on its website, organized by loan size brackets. Rates typically range from 7 to 12 percent annually, though this changes frequently.

You pay interest only on the balance you actually owe, not on the full borrowing power available to you. If you borrow $5,000 and pay back $2,000 a month later, you pay interest only on the remaining $3,000 for that month. There are no setup fees or annual fees for having a margin account open, even if you never use the margin feature.

Interest is tax-deductible in some situations (typically if you borrowed to buy investments that generate taxable income), but not in others. Consult a tax professional about whether your margin interest qualifies for a deduction.

What happens if your account value drops

If the value of your securities falls and your account equity drops below the maintenance requirement, Fidelity will issue a margin call. This means you must deposit cash or sell securities to restore your account to the required level. The timeframe to meet a margin call is usually the same business day, though Fidelity may allow a short extension in unusual market conditions.

If you do not meet the margin call, Fidelity has the right to liquidate your positions without asking your permission. The firm will typically sell the most liquid securities first to raise cash quickly. This forced liquidation can lock in losses and disrupt your investment strategy. You remain responsible for any shortfall if the forced sales do not raise enough to cover the loan.

Margin calls are most common during market downturns when stock prices fall sharply. If you use margin, monitor your account regularly and keep cash available to meet a potential call.

Closing or downgrading your margin account

You can close your margin account and return to a cash account at any time. Log into your account, go to Account Settings, and look for an option to remove margin or downgrade to a cash account. If you have an outstanding margin loan balance, you must pay it off in full before Fidelity will allow the downgrade. You can do this by depositing cash or selling securities.

Fidelity will process the downgrade within one business day. Once complete, you will no longer be able to borrow, and your account will operate on a cash-only basis. You can reopen a margin account later if you meet the requirements again, though Fidelity may review your account history before approving a second request.

Frequently Asked Questions

Can I use margin in a retirement account?

No. Margin is available only in taxable brokerage accounts. IRAs, 401(k)s, and other retirement accounts do not allow borrowing, regardless of account balance or trading experience. If you want to use margin, you must do so in a separate individual or joint brokerage account.

What is the difference between initial margin and maintenance margin?

Initial margin is the amount you must deposit when you first buy on margin — typically 50 percent of the purchase price. Maintenance margin is the minimum you must keep in your account at all times, usually 25 to 30 percent. If your account falls below maintenance, you get a margin call. Both are set by FINRA, though Fidelity may enforce stricter limits.

Can Fidelity liquidate my positions without telling me first?

Yes. If you do not meet a margin call within the required timeframe, Fidelity can sell your securities without advance notice. The margin agreement you sign gives Fidelity this right. To avoid forced liquidation, respond to margin calls immediately by depositing cash or selling positions yourself.

Do I pay interest if I never actually borrow?

No. Interest accrues only on the amount you borrow. Having a margin account open costs nothing if you never use the borrowing feature. You can keep a margin account active indefinitely without borrowing and pay no fees.

What happens if I owe more than my account is worth?

This can happen if your securities drop sharply and you do not meet margin calls. You remain legally responsible for the full loan amount plus interest. Fidelity will pursue collection, which may include freezing your account or referring the debt to a collection agency. This is why margin carries significant risk and is not suitable for all investors.