Free Credit Balance

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DEFINITION of 'Free Credit Balance'

The cash held by a broker in a customer's margin account that can be withdrawn by the customer at any time without restriction. This balance is calculated as the total remaining money in a margin account after margin requirements, short sale proceeds and special miscellaneous accounts are taken into consideration.

BREAKING DOWN 'Free Credit Balance'

In a cash account, the credit balance is the amount of money that remains after all purchases, and it is free from withdrawal restrictions. However, within a margin account, the credit balance of the account includes not only the cash remaining in the account, but also proceeds from short sales along with money used to meet margin requirements, and excess margin and buying power. Because the credit balance of a margin account includes both unrestricted amounts and restricted amounts, the free credit balance is created to determine the total amount that can be withdrawn by the account holder.

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RELATED FAQS
  1. Why do you need a margin account to short sell stocks?

    The reason that margin accounts and only margin accounts can be used to short sell stocks has to do with Regulation T, a ... Read Full Answer >>
  2. What are the minimum margin requirements for a short sale account?

    In a short sale transaction, the investor borrows shares and sells them on the market in the hope that the share price will ... Read Full Answer >>
  3. What is a margin account?

    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Full Answer >>
  4. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  5. How does a broker decide which customers are eligible to open a margin account?

    Brokers have the sole discretion to determine which customers may open margin accounts with them, although there are regulations ... Read Full Answer >>
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