What is 'Call Money'
Call money is money loaned by a bank that must be repaid on demand. Unlike a term loan, which has a set maturity and payment schedule, call money does not have to follow a fixed schedule. Brokerages use call money as a short-term source of funding to cover margin accounts or the purchase of securities. The funds can be obtained quickly.
BREAKING DOWN 'Call Money'
Brokerages know that they are taking on risk by using funds that can be called at any time, so they typically use call money for transactions that will be resolved quickly. If the bank recalls the funds then the broker can issue a margin call on its clients in order to make the repayment. The call money rate is used as the interest rate on the loans.