Interactive Brokers offers interest rates of up to 4.08% on idle cash for accounts with high NAVs, making it competitive with top brokerage platforms.
Managing idle cash effectively is crucial to maximizing returns in your brokerage account. Interactive Brokers (IBKR) offers a unique opportunity to earn interest on uninvested cash, but is it truly competitive compared to other brokerages? Let’s see how IBKR’s rates stack up and whether this feature makes sense.
Interactive Brokers Interest Rates on Uninvested Cash
Interactive Brokers allows clients to earn market-rate interest on their uninvested cash balances, but the rates are subject to several factors:
- Net Asset Value (NAV): Your account's overall value determines the interest rate tier you're eligible for.
- Cash Balance Thresholds: Interest is only paid on cash balances exceeding $10,000 in USD (or the equivalent in other currencies). Balances below this threshold earn no interest.
- Account Segments: Interest is only calculated on cash in the securities segment, though funds can be swept between segments manually or automatically.
For clients with a NAV over $100,000, the annual interest rate is currently 4.08% on USD balances above $10,000. If your NAV is less than $100,000, the rate decreases incrementally based on your NAV but increases as your balance approaches the $100,000 threshold.
Here’s an example for USD balances:
| Account Cash Balance (USD) | NAV 50k | NAV 90k | NAV > 100k |
| 1,000,000 | - | - | 4.039% |
| 100,000 | - | - | 3.672% |
| 50,000 | 1.632% | 2.938% | 3.264% |
| 25,000 | 1.224% | 2.203% | 2.448% |
| 0 - 10,000 | 0% | 0% | 0% |
IBKR’s interest-earning potential is impressive for those with higher balances and NAVs, making it an appealing option for seasoned investors.
IBKR Interest Rates vs. Other Brokerages
How does IBKR compare to other platforms? Here’s a quick look:
| Interactive Brokers | Public.com | E*TRADE | Moomoo | Webull | Robinhood |
| Up to 4.08% on balances above $10k | 4.35% | 4.10% for Savings, 4-5% for CDs | Up to 6.8% p.a.* for the first 30 days, applicable to up to A$80,000 uninvested cash balance | 5% APY on uninvested cash | 4.25% APY as a Robinhood Gold member on your uninvested brokerage cash |
IBKR offers competitive rates compared to major players, particularly for those with substantial cash reserves. Platforms like Public.com and Robinhood Gold may offer higher rates for specific account types or premium services.
Pros and Cons of Keeping Idle Cash at Interactive Brokers
Consider the attractive interest rates and potential drawbacks to decide if Interactive Brokers is right for your idle cash.
Pros
- Competitive Interest Rates: Up to 4.08% on balances over $10,000 is among the highest in the industry for brokerage accounts.
- Seamless Auto-Sweep Functionality: Move funds between segments without hassle to maximize interest-earning potential.
- Transparency: Clear-tiered interest rates help investors understand potential earnings.
Cons
- Threshold Requirements: No interest is paid on balances below $10,000, which might disadvantage smaller investors.
- Missed Investment Opportunities: Holding cash for interest instead of investing may limit potential returns.
- Complex Structure: Interest eligibility is influenced by NAV and segment balances, which may confuse less experienced investors.
Earning Interest From Brokerage Accounts vs. Bank Accounts
Brokerage accounts like IBKR offer higher interest rates than most traditional savings accounts, but there are trade-offs:
- Higher Rates: While traditional banks may offer less than 1% on savings, IBKR provides rates exceeding 4% for eligible balances.
- No FDIC Insurance: Unlike bank accounts, cash in brokerage accounts isn’t federally insured, posing a potential risk.
- Liquidity Limitations: Banks offer check-writing and easier access to funds, while brokerage accounts focus on investment flexibility.
Strategies for Managing Idle Cash
If you want to optimize your uninvested cash, these strategies can help you make the most of it.
- Sweep Accounts: Automate transfers into interest-earning accounts to maximize returns.
- Money Market Accounts: Invest in short-term instruments for higher liquidity and interest.
- Short-Term Securities: Consider Treasury bills or bonds for competitive rates with minimal risk.
- Optimize NAV: Consolidate funds within your IBKR account to increase your NAV and unlock higher rates.
- Regular Reviews: Periodically assess your idle cash and ensure it aligns with your financial strategy.
The Bottom Line
Interactive Brokers provides competitive interest rates on uninvested cash, particularly for accounts with higher NAVs. While its rates outperform many competitors’ rates, the $10,000 threshold and lack of FDIC insurance may deter smaller investors. Whether IBKR is the right choice depends on your investment strategy, cash balance and willingness to navigate its tiered system.
Frequently Asked Questions
How often do Interactive Brokers pay interest?
Interest is calculated daily and paid monthly into your account.
Is my money safe with Interactive Brokers?
Yes, IBKR is a highly regulated brokerage with SIPC protection, though uninvested cash isn’t FDIC insured.
Can I use Interactive Brokers as a bank?
Not entirely. While IBKR offers interest on idle cash, it lacks typical banking services like check writing or debit cards.
*T&Cs apply. Only available to new clients. The standard rate may be subject to change.