Interactive Brokers stands out in offering the lowest possible commissions and margin rates, which makes it a solid option to consider for stock trading. In this Interactive Brokers review, we’ll explain how the online stock broker compares on key factors we think are most important to consider before opening an account. Find out more about the pros and cons below.
As low as $0 stock trades
This stock broker is a good fit for: Some investors, and more frequently traders, trading on margin. Interactive Brokers margin rates easily trounce the competition.
Designed for active traders and sophisticated investors, Interactive Brokers may not be a best online stock broker for everyone. However, it does have some killer features that make it stand out from the pack:
With zero-commission trading through its IBKR Lite platform and a standard commission rate of one-half cent per share ($1.00 minimum per trade), its pricing is designed for investors and traders who want to minimize the cost of trading.
Interactive Brokers’ margin rates are substantially lower than the competition's. Whereas many brokers price the first dollar of margin at an interest rate in excess of 10%, margin loans from Interactive Brokers cost a third as much. The difference really adds up, particularly for investors who carry large margin balances for long periods of time.
While virtually all brokers enable you to buy foreign stocks that have a listing on a U.S. exchange, few enable customers to trade directly on markets outside the United States. Interactive Brokers offers access to more than 120 markets around the globe, several times more markets than any other discount brokerage firm.
Trader WorkStation is a powerful trading platform, especially when you consider that it is free. It truly has something for everyone, whether you trade stocks, ETFs, options, futures, or currencies.
To be a top stock broker, no-fee mutual funds are practically table stakes. Interactive Brokers, rightly, offers a wealth of mutual funds that can be purchased with no fee.
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Interactive Brokers transparently outlines its fees for its IBKR Pro and IBKR Lite offerings, yet they are more complicated to understand than other stock brokers with the same fees, regardless of trading frequency and account size. Our commission overviews below will help you decipher the fees you may encounter.
Some of Interactive Brokers research tools are only available for a fee. Admittedly, these tools are useful, we just wish they were free.
If you want a less complicated pricing structure and a mobile-only experience: Robinhood is as simple as they come for pricing and mobile trading. The stock broker includes $0 commissions for stocks, options, and ETFs, and offers access to cryptocurrencies. The downside is its margin rates aren't highly competitive with Interactive Brokers'.
If you're not an active trader and don't rely on margin: Merril Edge® packs in a diversified set of offerings that competes with the best brokers, making it a great one-stop shop that's easier to trade with than Interactive Brokers. But this isn't the broker for you if seeking the lowest margin rates in the market.
Before we get into a discussion of Interactive Brokers' pricing, it's important to mention that there are two pricing plans customers can choose. The IBKR Lite plan has commission-free trading but is lighter on features and has higher interest rates for margin loans. For options trading, the IBKR Lite plan offers a flat commission rate of $0.65 per contract. The IBKR Lite plan is sufficient for the needs of most U.S. investors.
On the other hand, the IBKR Pro plan offers more features that appeal to frequent and professional traders and charges significantly lower rates on margin loans. Whereas most discount brokers employ a flat-rate commission schedule, Interactive Brokers’ commissions are variable, increasing with the size of the trade. Interactive Brokers’ IBKR Pro commissions are detailed in the table below. It's also worth noting that IBKR Pro offers access to the company's SmartRouting order system, which the company claims improves trade pricing by $0.47 per 100 shares versus the typical brokerage. So, while the platform does charge commissions, this could help to offset it.
|Stocks and ETFs||Mutual funds|
|Stocks and ETFs $0.005 per share (minimum $1), $0 on IBKR Lite platform||$14.95|
|$0.10 or more||$0 per trade, $0.65 per contract|
|$0.05 to $0.09||$0 per trade, $0.50 per contract|
|$0.05 or less||$0 per trade, $0.25 per contract|
In addition to the above commission schedule, Interactive Brokers also offers a tiered commission plan for stocks and options that can offer significant cost savings for active traders who trade high volumes of shares each month.
The variable commission schedule makes Interactive Brokers one of the cheapest brokers for small trades. For example, to purchase 200 shares of Apple, currently worth more than $25,000, an Interactive Brokers customer on the IBKR Pro platform would pay just $1 to make the trade, while customers who opt for the lower-frills IBKR Lite platform, which is fine for the majority of investors, would pay no commissions at all.
Interactive Brokers may be built for active stock traders, but it doesn’t leave fund investors behind. It offers more than 37,000 mutual funds, of which more than 8,300 can be purchased without paying its standard transaction fee ($14.95 or 3% of the transaction, whichever is less).
|Total mutual funds||More than 37,000|
|No-transaction-fee mutual funds||More than 8,300|
Because Interactive Brokers is designed for active traders and sophisticated investors, it has a few quirks in its list of fees that warrant additional discussion.
$10 minimum monthly commission requirement (IBKR Pro only): With a few exceptions for younger investors and those with large balances, Interactive Brokers requires individual investors to spend at least $10 on commissions every month. If you do not spend at least $10 on commissions in any given month, you will pay a minimum activity fee equal to $10 minus the commissions paid. Thus, if you spend $2 on commissions in one month, you would pay a monthly activity fee of $8 to bring your total commissions to $10. This fee is waived for account holders who have an equity balance of at least $100,000. (People who are 25 years are younger are only required to generate $3 in monthly commissions.)
Options exercise and assignment fees: The best options trading brokers should help active traders cut costs. Interactive Brokers delivers on this front and doesn’t charge an extra fee to exercise an option you own, nor does it charge a fee if an option you sold is assigned. Many brokers charge for options exercise and assignment. Interactive Brokers options fees are among the best for people who expect to exercise options, or have them assigned.
Research fees: We’ll address this later in more detail, but for now, we should note that Interactive Brokers has a la carte pricing for many popular research and news tools. Though some are offered for free, many more come with a monthly subscription fee.
If you are an infrequent trader, or have less than $100,000 to keep in your account, the $10 minimum monthly commission may sway you away from Interactive Brokers' Pro platform, and the IBKR Lite platform could be the better choice for you. Given many brokers charge $4.95 per stock trade, with no minimum monthly commission requirements, Interactive Brokers is costlier for people who simply want to place the occasional trade.
Customers will find that Interactive Brokers has several different trading platforms designed for the needs of active traders and long-term investors alike. Its platform earns high reviews from active traders who appreciate access to a fully-featured trading platform on their desktop.
Here are the platforms Interactive Brokers has to offer:
Client Portal: Interactive Brokers' modern and user-friendly desktop trading platform. This is the easiest way for an investor to log in and place a trade on the platform. But all clients (IBKR Pro and Lite) have access to all three of these.
IB Trader WorkStation (TWS): TWS is a fully-featured desktop trading platform that offers all the functionality (and more!) that investors have come to expect from desktop solutions. Fully customizable, you can design your screen how you want to. Its watch list feature can include an extraordinary amount of information on every stock, from its P/E ratio to how many days it takes the company to sell its inventory, on average. TWS is chock full of screeners, stock option analysis tools, and backtesting options.
Mobile platforms: Interactive Brokers also offers a powerful mobile application for iOS and Android devices. The apps offer streaming data, charting tools, and the ability to place even the most complex trades from a mobile device. With access to over 120 worldwide markets, mobile users will find that there are no limitations on their ability to trade from the palm of their hand.
As long-term buy and hold investors, we don’t necessarily make full use of all the bells and whistles of a fully-featured trading platform. Frankly, the impressive functionality offered by its desktop platform, IB TWS, can be as much of an advantage for active traders as it is a disadvantage for inexperienced investors.
New investors seeking a good stock broker for beginners may be put off by all the moving parts of its desktop platform. Even the basics can be overwhelming since the platform is built to offer access to so many different markets. For example, after entering a ticker symbol for a popular ETF, the platform prompted us to select whether we wanted a quote for the stock, options, or futures contracts based on its value. It’s simple to navigate, but new investors may be lost in the shuffle.
Interactive Broker's margin rates are some the lowest available in the market. Here's a rundown of its margin rates by margin balance.
|Margin Balance||IBKR Pro Accounts||IBKR Lite Accounts|
|$0 - $100,000||1.59%||2.59%|
|$100,000 - $1 million||1.09%||2.59%|
|$1 million to $200 million||0.75%||2.59%|
It’s safe to say that margin lending is Interactive Brokers’ special sauce. Most competing discount brokers charge two to three times more for margin loans than Interactive Brokers. If margin is central to your trading or investing strategy, its low interest rates may alone be a reason to put it on the short list of brokers to choose from.
Margin rates decrease as you borrow more, and IBKR Pro customers receive lower margin rates than IBKR Lite customers do.
The list above is indicative of the brokerage’s focus on high value accounts, financial professionals, and active traders. Few brokers even bother to publish margin rates for amounts in excess of $2 million-$5 million. That Interactive Brokers publishes margin rates for loans in excess of $200 million says a lot about the service from the get go.
Interactive Brokers also deserves some praise for using a clear and easy-to-understand method for calculating its margin interest rates. The brokerage adds a spread to the Federal Funds Effective Overnight Rate, whereas other brokers substitute their own proprietary benchmark to calculate interest charged to customers who have a debit balance.
Primarily an online brokerage, Interactive Brokers doesn’t have a large branch footprint like many of the largest retail discount broker firms. That said, it offers support 24 hours a day by phone, chat, or a secure message through its account center.
This brokerage offers a wealth of research, with a catch: Not all of it is free, as certain research providers charge a flat-rate monthly subscription fee for access. We’ll explain in more detail. For now, we’ll focus on what is free:
We haven’t even scratched the surface of what Interactive Brokers has to offer in free news and screeners -- going through every tool would take hours, if not days -- but it’s certain that it ranks among the top of the list as far as its screening tools go.
Of course, there’s a downside: Research you might expect to receive for free at other brokers isn’t free at Interactive Brokers. For example, many brokers offer Morningstar equity research reports for free, but Interactive Brokers’ non-professional customers pay about $15 per month for the service. That said, a la carte research and news options are plentiful, and many offer a free trial so you can see what you’ll get before you commit to a monthly charge for access.
If the following statements apply to you, Interactive Brokers should make a short list of places to open a brokerage account.
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