if you buy stocks your account, intra-day leverage is reduced. i don't understand why no interest on less than 10K when majority of people at banks don't even have $2000 interest and gets paid interest. these brokers charge 7% interest when you borrow money from them on margin...they are making tonnes of money in paying NO INTEREST on cash balances as majority of their clients don't have more than 10K and don't care about investing...with buy and hold otherwise they use another broker like etrade or something else. it's mostly for retail futures and options that is what IB is for.
the only reason they would have 100% cash is because cash has more leverage during intra-day.. volatile stocks and ETFs in you portfolio effect your leverage. that is a good tip on using bil considering very little risk in t-bils...but the brokers don't tell you that. 4% is peanuts in interest rates considering long term inflation is 4% so you aren't making anything... IB wants to make money on the interes spread so 10K is $700/ year in free money or interest they get from clients with less 10K and that always have cash.. you see the broker is not your friend.
I'd use any excess cash in "safe" long-term investments, such as the yen (not paying interest anyway) or GLD/SLV.
That is how they want to do their fair business. Potential customers will be misled easily when they read that IB pays X%. They don't know IB won't pay the first 10K of every currency in both stock and futures accounts even if you hold more than 10K in IB. If you have USD and GBP in both stock and futures accounts, you lose about 40K equivalents of interest year by year.
It's 10K equiv (approx) per currency, but not yet again for futures bec the balances are automatically moved between futures and stocks/options. The futures account, as far as I can tell, exists only to meet regulatory requirements and never had free cash balances in it. Also you don't need to keep free cash balances in more than one currency.... you can FX transact if you think you are losing more in interest than the benefit of minimizing FX transactions, etc.
It's ashame that they don't pay interest on all cash balance like another broker that I am using for an universal account. If interest rate at other brokers drops down to 0.5%, I might re-open an account with them again. Too many nickel and dime implicit costs at this point.
You lose about $225-$275 in foregone interest, after tax, per year (for US residents). It is what it is..... if it isn't worth it for a given person, it isn't. If it is, it is.
vectors101, Any broker deserves compensation for its services, including the cost of maintaining small accounts. IB makes full disclosure of the details, so there is no deception or unfairness. Your ridiculous suggestion that brokers should work for free reveals the truth, that you lack the knowledge and experience needed to compare brokers. This is reflected in both your flawed discussion of interest paid on cash balances, and your complete neglect of other advantages to trading equities thru IB. These advantages include low commissions, superior order execution speed and prices, access to API, etc., etc.,
ZRA really has no idea what he is talking about. Futures brokers generally do not pay interest at all. ZRA obviously doesn't know this. He criticizes IB for failing to pay adequate interest on futures accounts. IB is actually superior to other futures brokers in this respect. Any cash balance in an IB futures subaccount, in excess of that needed to satisfy performance bond ("margin") requirements, is nightly swept into the linked securities subaccount, where it earns interest and enjoys protection by SIPC and private (Lloyd's) insurance. Most futures brokers provide no such securities subaccont linked to a futures subaccount. ZRA also ignores the fact that IB will pay interest on the entire free cash balance, including the first $10K, at rates higher than any broker will pay, provided that cash is invested in EFPs.
Come on guys! Every month you get a free wire. That's ($25*12)$300 worth of benefit if you take advantage of it. Furthuremore you get the US data for free. I think is fair that they don't give you interest on the 10K with all these freebies. Besides they offer you a alternative cheap way (EFP) to get back the interest on the 10K. I think they disclose everything and is a business decision not to offer interest on the first 10K and offer you a way to get back the interest thru EFP. What else more can they do? Is really the trader's choice whether to stay with IB. If they decide to trade thru IB, i don't think there is a need to complain about the interest on the 10K