Interactive Brokers will next year begin paying interest on cash balances to accounts smaller than $100,000 in assets.
With the change, Interactive looks to be more competitive with the rest of the industry, at least when it comes to small accounts. Most firms generally don’t require minimums to begin paying on cash.
The Greenwich, Conn.-based deep discounter currently pays 1.69 percent on cash balances for its larger clients—well above what competitors pay.
But small accounts get a break next year when individual accounts with under $100,000 will receive interest at rates proportional to the size of the individual account, Interactive said in an announcement earlier this week. A $50,000 account, for example, will earn interest at a rate equal to one-half the rate paid to accounts of $100,000 or more.
All clients must still maintain $10,000 in cash balances before interest begins accruing on amounts above that level.
That means smaller accounts at the discounter may not earn any interest under the new policy, or at least not much more than they’d get at competing firms. But traders who have larger cash positions and short sellers could see some benefit: Interactive counts and pays on cash from short sales, for example.
The changes could benefit clients of advisors who custody at the firm. Interactive serves about 4,300 RIAs, as well as brokerage firms, hedge funds and proprietary trading groups that together make up about two-thirds of its $143 billion in assets.