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This is an extremely available offering from brokerages, including Charles Schwab and Interactive Brokers. The magic word in the industry is "integrated cash ma

This is an extremely available offering from brokerages, including Charles Schwab and Interactive Brokers. The magic word in the industry is "integrated cash management", and the mechanism is usually "You use the debit card as normal, it results in drawdowns against either your cash balance or your marginable equity as appropriate, and (if you get into margin territory) you repay at your leisure by adding new money or liquidating stocks of your choice." Brokerages love this product, because being a debit issuer is a great business to be in. From an optimizing-your-personal-finances perspective, most HNers should probably get a rewards card from their bank of choice; you can trivially arrange the credit card to pull from a bank account and your brokerage to push to the bank account, in the case where one's spending is materially backed by one's investment portfolio (which feels like not something people should make a habit of in most cases).

whitepoplar 8y ago
I love Interactive Brokers, but I'm trying to figure out why people use IB's debit card, drawing from margin. I know they have the best margin rates in the industry, but it's still something, and the margin interest isn't deductible if it's not used to buy securities. Is there a particular tax advantage that I'm not considering? I'd love to know as this sort of stuff is like crack to me.
- purplerabbit 8y ago
  Drawing from margin prevents you from needing to sell and rebuy securities to free up $ as needed. This means no taxable events occur, so you don't have to deal with capital gains. It's also the cheapest possible credit you can obtain as a consumer. TBH it's so cheap that you can reasonably expect your investment returns to at least match it in the long run, so as long as you aren't drawing so heavily as to get an unhealthy leverage ratio

whitepoplar 8y ago

I love Interactive Brokers, but I'm trying to figure out why people use IB's debit card, drawing from margin. I know they have the best margin rates in the industry, but it's still something, and the margin interest isn't deductible if it's not used to buy securities. Is there a particular tax advantage that I'm not considering? I'd love to know as this sort of stuff is like crack to me.

purplerabbit 8y ago
Drawing from margin prevents you from needing to sell and rebuy securities to free up $ as needed. This means no taxable events occur, so you don't have to deal with capital gains. It's also the cheapest possible credit you can obtain as a consumer. TBH it's so cheap that you can reasonably expect your investment returns to at least match it in the long run, so as long as you aren't drawing so heavily as to get an unhealthy leverage ratio