Free Credit Balance


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The cash held by a broker in a customer's margin account that can be withdrawn by the customer at any time without restriction.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amounts and restricted amounts, the free credit balance is created to determine the total amount that can be withdrawn by the account holder.

  1. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  2. Buying Power

    The money an investor has available to buy securities. In a margin ...
  3. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  4. Regulation T - Reg T

    The Federal Reserve Board regulation that governs customer cash ...
  5. Cash Account

    A regular brokerage account in which the customer is required ...
  6. Initial Margin

    The percentage of the purchase price of securities (that can ...
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  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. Can mutual funds use leverage?

    Traditionally, mutual funds have not been considered leveraged financial products. However, a number of new products have ... Read Full Answer >>
  5. How do hedge funds use leverage?

    Hedge funds use several forms of leverage to chase large returns. They purchase securities on margin, meaning they leverage ... Read Full Answer >>
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    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>

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