With margin investing disabled, why do I have an account deficit?
Before you begin
If you're using the margin investing feature, check out I have margin investing enabled. Why do I have an account deficit?
You have an account deficit because you’ve used more buying power than you had available. Several things can cause you to have an account deficit, including ACH reversals after using Instant Deposits, fees, and cases when you’re assigned early on an options spread or in certain option exercise scenarios.
ACH reversals after using Instant Deposits
ACH reversals after using Instant Deposits
By default, you'll receive instant access to $1,000 of deposits made. If you're subscribed to Robinhood Gold, then you can access at least $5,000 in Instant Deposits and up to $50,000 in Instant Deposits in your investing account.
If you spend some or all of your Instant Deposits and your scheduled ACH transfer is canceled (your transfer is reversed), the amount of the reversed deposits will be deducted from your buying power, potentially causing you to have an account deficit.
To learn more about how you can avoid reversals, check out How to prevent bank transfer reversals.
If you're charged a fee and you don’t have enough brokerage cash in your account to cover it, you may have an account deficit. Some of the most common fees that cause customers to have an account deficit are Robinhood Gold fees and fees associated with American Depositary Receipts (ADRs). You can find all of your past Robinhood Gold fees and interest payments in the app in History. Additionally, you can find information about your next Gold billing cycle in the Account Overview. Check out our fee schedule to learn more.
Option exercise and assignment
Option exercise and assignment
Note
For more information about exercises and assignments, check out Expiration, exercise, and assignment.
If you’re trading an options spread, your long leg should cover your short leg. However, you may have an account deficit if the short leg of your options spread is assigned prior to the expiration date.When you’re assigned early on a short leg in general, before you exercise the long leg of your spread, your buying power will decrease and you may have an account deficit. This is because the positions you hold are used to calculate your buying power, and at that time, the shares (for call spreads) or buying power (for put spreads) are needed to cover the deficit in your account.If your long leg is in-the-money and you would like to exercise, you can either do so in your app or contact us so we can help do it for you. You can also experience an account deficit when your long leg is exercised in anticipation of your short leg being assigned. Generally, if the short leg assignment is processed in the account, the deficit will be covered.
Keep in mind
An account deficit due to early assignment might result in a margin call. In these cases, Robinhood is likely to take action to cover your position for you.
How do I resolve an account deficit?
How do I resolve an account deficit?
You can resolve an account deficit by depositing funds or closing positions.
All investments involve risk including loss of principal. No investments are FDIC insured. All examples are hypothetical and don’t reflect actual or anticipated results. Content is provided for informational purposes only, doesn’t constitute investment advice, and isn’t a recommendation for any security, account type or feature, or trading strategy. Past performance doesn’t guarantee future results.
Margin investing involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation.
Regardless of the underlying value of the securities you purchased, you must repay your margin debt. Robinhood Financial can change its maintenance margin requirements at any time without prior notice. If the equity in your account falls below the minimum maintenance requirements (varies according to the security), you’ll have to deposit additional cash or acceptable collateral. If you fail to meet your minimums, Robinhood Financial may be forced to sell some or all of your securities, with or without your prior approval.
Robinhood Financial charges a margin interest rate that varies depending on your settled margin balance and the upper bound of the Target Federal Funds Rate, which is set by the Federal Reserve and is subject to change without notice. The formulas used to calculate the margin interest rate are subject to change at Robinhood Financial’s discretion. The variable margin rates are as of May 20, 2024 and might change at any time without notice and at Robinhood Financial’s discretion.
For more information, review FINRA’s Investor Alert and Robinhood Financial’s Customer Relationship Summary, Margin Disclosure Statement, and Margin Agreement. These disclosures contain important information on Robinhood Financial’s products and services, conflicts of interests, lending policies, interest charges, and the risks associated with margin investing enabled accounts.
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FAQs
You have an account deficit because you've used more buying power than you had available. Several things can cause you to have an account deficit, including ACH reversals after using Instant Deposits, fees, and cases when you're assigned early on an options spread or in certain option exercise scenarios.
How to get rid of account deficit on Robinhood? ›
You can resolve an account deficit by depositing funds, closing positions, or exercising options contracts.
What happens if you have a brokerage account deficit? ›
If you don't have any money in your brokerage account, you generally can't buy more stocks, ETFs, or whatever assets you typically invest in. And if you maintain a $0 balance for an extended period of time, that could end up impeding your long-term financial goals.
Why won't Robinhood let me use margin? ›
Before you can invest on margin, you have to apply and will only have access if you meet eligibility requirements. You'll only start investing on margin after the cash in your investing account has been fully invested. This means that if you have cash in your account, you won't invest on margin until it's fully spent.
What does account deficit mean? ›
Current account deficit occurs when a nation sends more money abroad than it receives. A trade deficit is the largest component of a current account deficit, which occurs when a country imports more than it exports in a given period of time.
Why is Robinhood saying I have an account deficit? ›
If you're charged a fee and you don't have enough brokerage cash in your account to cover it, you may have an account deficit. Some of the most common fees that cause customers to have an account deficit are Robinhood Gold fees and fees associated with American Depositary Receipts (ADRs).
How do you solve current account deficit? ›
Many economists believe that the most effective way to reduce the current-account deficit is by reducing domestic spending or "absorp- tion" relative to income by increasing the national saving rate.
What happens if you lose a margin trade? ›
What happens if you don't meet a margin call? Your brokerage firm may close out positions in your portfolio and isn't required to consult you first. That could mean locking in losses and still having to repay the money you borrowed.
What happens to my investments if my brokerage firm fails? ›
Typically, when a brokerage firm fails, the Securities Investor Protection Corporation (SIPC) arranges the transfer of the failed brokerage's accounts to a different securities brokerage firm. If the SIPC is unable to arrange the accounts' transfer, the failed firm is liquidated.
What happens if you can't pay a margin call? ›
If You Fail to Meet a Margin Call
Forced liquidations generally occur after warnings have been issued by the broker regarding the under-margin status of an account.
You have to determine whether margin investing is consistent with your investment strategy. You should consider your own investment experience, goals, and sensitivity to risk. By enabling margin investing for your investing account, Robinhood isn't recommending the use of margin investing.
Is margin investing worth it? ›
Margin trading is risky since the margin loan needs to be repaid to the broker regardless of whether the investment has a gain or loss. Buying on margin can magnify gains, but leverage can also exacerbate losses.
How do you pay back margin loans? ›
You determine the payback schedule and payment amount. It's important to have a plan for reducing your margin balance to minimize the interest amount you're charged which you can do by selling a security or depositing cash into your account through electronic funds transfer (EFT), bank wire, or depositing a check.
What causes current account deficits? ›
A nation has a current account deficit when it sends more money to sources abroad than it receives from sources abroad. A trade deficit is normally the largest component of a current account deficit. The trade deficit or surplus reflects the difference in the total value of all goods exported and imported.
Is deficit bad or good? ›
A government runs a fiscal deficit when it spends more than it takes in from taxes and other revenues. An increase in the fiscal deficit can boost a sluggish economy by giving individuals more money to buy and invest more. Long-term deficits can be detrimental to economic growth and stability.
What increases account deficit? ›
During a strong economic expansion, import volumes typically surge; if exports are unable to grow at the same rate, the current account deficit will widen. Conversely, during a recession, the current account deficit will shrink if imports decline and exports increase to stronger economies.
How do you remove a deficit from a balance of payment? ›
To correct a balance of payments deficit, a country can devalue its currency, increase exports, reduce imports, or implement fiscal austerity. Devaluing the currency can make a country's exports cheaper and imports more expensive, thereby improving the balance of payments.
How do I hide my account value on Robinhood? ›
If you prefer to hide the dollar value of your portfolio, you can just display your portfolio's percentage change. After adding the Portfolio widget, select and hold it to open Settings. In Display mode, set it to Percentage only.
What happens if you don't pay Robinhood debt? ›
Next, the lender may report the late payment to credit bureaus, which can negatively impact the borrower's credit score. Finally, a delinquent debt may eventually go into default. At this time, the lender might sell the debt to a collection agency or take legal action against the borrower.
