You can convert a standard Schwab account to a margin account by requesting it through your account settings or by calling Schwab directly

A margin account lets you borrow money from Schwab to buy securities, using your existing holdings as collateral. A standard cash account does not allow borrowing — you can only buy what you have cash for. If you want the ability to borrow, you need to request the conversion from Schwab. The process takes minutes if you do it online, or you can call and have it done over the phone.

Before you convert, understand that margin accounts come with costs and risks. You pay interest on borrowed money, and Schwab can force you to sell positions if your account value drops below their maintenance requirement. Many beginners should not use margin. But if you have decided you need it, here is exactly how to set it up.

Key Takeaways

  • You can convert to a margin account through the Schwab website under Account Settings, or by calling Schwab at 1-800-435-4000 and asking to upgrade.
  • Schwab requires a minimum account balance — currently $2,000 — before you can open a margin account, though this amount can change.
  • You must agree to Schwab's margin agreement, which explains the interest rates, maintenance requirements, and what happens if your account falls below the required level.
  • Margin interest rates vary based on how much you borrow and current market conditions, and Schwab publishes their rates on their website.
  • Converting to margin does not automatically borrow money — you only pay interest on the amount you actually borrow.

Converting through the Schwab website

Log into your Schwab account and go to Account Settings. Look for the section labeled Account Features or Account Type. You should see an option to upgrade to a margin account. Click it and review the margin agreement Schwab presents — this is the legal document that spells out the terms, interest rates, and what Schwab can do if your account balance drops.

Read the agreement carefully, especially the section on maintenance requirements. This is the minimum account value Schwab requires you to maintain. If your account falls below it, Schwab can sell your positions without asking you first. Once you have read it, check the box confirming you understand and accept the terms, then submit. The upgrade usually takes effect when ready or within one business day.

If you cannot find the option in Account Settings, or if the website tells you that you do not meet the requirements, you will need to call instead. This usually means your account balance is below Schwab's minimum, or there is a restriction on your account type that prevents the upgrade.

Converting by phone

Call Schwab at 1-800-435-4000 and tell the representative you want to convert your account to a margin account. They will verify your identity, confirm your account balance meets the minimum requirement, and walk you through the margin agreement over the phone. You will need to verbally agree to the terms. The representative will note this in your account, and the upgrade takes effect when ready.

Calling is often faster if you have questions about the agreement or if the online option is not working. The representative can also explain Schwab's current margin interest rates and answer questions about maintenance requirements specific to your situation.

What Schwab requires before you can convert

You must have at least $2,000 in your account. This is Schwab's current minimum, but minimums can change, so confirm the current amount when you request the conversion. The $2,000 can be in cash or securities — Schwab counts both toward the minimum.

Your account must be in good standing. If you have pending disputes, restrictions, or violations of Schwab's terms, Schwab may deny the conversion request until those issues are resolved. If you are unsure whether your account has any restrictions, ask the representative when you call.

You must be at least 18 years old. If your account is a custodial account for a minor, you cannot convert it to a margin account.

Understanding margin interest rates and costs

Schwab charges interest on the amount you borrow, not on your entire account balance. The interest rate depends on how much you borrow and the current market environment. Schwab publishes a tiered rate schedule on their website — the more you borrow, the lower your rate per dollar, but you still pay more total interest.

Interest accrues daily and is usually charged to your account monthly. You can see your current margin balance and interest charges in your account under the Positions or Margin section. If you pay back the borrowed money, the interest stops accruing on that amount.

Schwab also charges a maintenance requirement, which is the minimum percentage of your account value that must be equity (your own money), not borrowed funds. The standard requirement is 30 percent, meaning you can borrow up to 70 percent of your account value. If your account falls below this, Schwab will issue a margin call and may sell your positions to bring you back into compliance.

What happens after you convert

Your account is now a margin account, but you have not borrowed anything yet. You only pay interest on money you actually borrow. You can continue to trade as you did before, using only your cash, and nothing changes. The margin feature is available if you choose to use it.

If you do borrow, you will see the borrowed amount listed under Margin Balance in your account. You can repay it at any time by depositing cash or selling securities. There is no fixed repayment schedule — Schwab lets you borrow as long as your account stays above the maintenance requirement.

You can also convert back to a cash account at any time. If you have an outstanding margin balance, you must pay it back first. Once the balance is zero, you can request the downgrade through Account Settings or by calling Schwab.

Common mistakes to avoid

Do not assume margin is information programs. You are borrowing at interest, and if the market moves against you, you can lose more than you invested. Many new margin users underestimate how quickly a market drop can trigger a margin call.

Do not ignore maintenance requirement warnings. If Schwab sends you a notice that your account is approaching the maintenance level, take it seriously. Schwab can sell your positions without your permission if you fall below the requirement, and they will sell whatever is easiest to liquidate, not necessarily what you want to sell.

Do not borrow more than you understand. Before you use margin, make sure you know exactly how much you are borrowing, what the interest rate is, and what your maintenance requirement is. A few minutes understanding these numbers can save you thousands in losses.

Frequently Asked Questions

Can I convert to a margin account if I have less than $2,000?

No. Schwab requires a minimum of $2,000 in your account before you can open a margin account. This minimum can change, so confirm the current requirement when you request the conversion. Once you reach $2,000, you can request the upgrade when ready.

What is the difference between a margin account and a cash account?

A cash account lets you buy only what you have cash for. A margin account lets you borrow money from Schwab to buy more securities than your cash balance allows. You pay interest on borrowed money, and Schwab can force you to sell positions if your account value drops too far.

Do I have to use margin once I convert?

No. Converting to a margin account straightforward makes borrowing available to you. You can keep using your account exactly as you did before, with only your own cash, and never borrow anything. You only pay interest on money you actually borrow.

How long does the conversion take?

If you convert online, the upgrade usually takes effect when ready or within one business day. If you call Schwab, it takes effect when ready after you agree to the terms over the phone. Either way, you can start using margin the same day or the next business day.

Can I convert back to a cash account later?

Yes. You can request a downgrade to a cash account at any time through Account Settings or by calling Schwab. If you have borrowed money, you must pay it back first. Once your margin balance is zero, the downgrade takes effect when ready.