Interest calculation on cash balances in different currencies at Interactive Brokers (IBKR) is a complex process that depends on various factors. Here is a comprehensive overview:
- Separate Calculation for Each Currency:
- Interest is calculated separately for each individual currency balance in your account.
- Each currency is treated independently, regardless of balances in other currencies.
- Daily Calculation and Monthly Posting:
- Interest is calculated and accrued daily based on the end-of-day settled cash balances.
- The daily interest accruals are posted to the account and adjusted against individual currency balances on the third business day of the following month.
- Positive Balance Interest:
- Interest is typically paid on balances exceeding a certain threshold for each currency.
- For example:
- USD: No interest on the first $10,000, interest paid on balances above $10,000
- EUR: No interest on the first €10,000, interest paid on balances above €10,000
- Other currencies may have similar thresholds (e.g., first 10,000 units)
- For example:
- Interest is typically paid on balances exceeding a certain threshold for each currency.
- Negative Balance Interest:
- If you have a negative balance in any currency, it is considered a margin loan and will accrue interest charges.
- Negative balances in one currency are not offset by positive balances in other currencies for interest calculation purposes.
- Interest Rates:
- Rates vary depending on the currency, balance amount, and current market conditions.
- IBKR uses a tiered system where higher balances may earn higher interest rates.
- For current rates, check the IBKR Interest Rates page.
- Account Net Asset Value (NAV) Impact:
- Accounts with a Net Asset Value (NAV) of $100,000 or more typically receive the full eligible interest rate.
- Accounts with NAV less than $100,000 may receive proportional interest rates.
- Calculation Basis:
- Interest rates shown on the website are annual rates.
- For actual calculations, a daily rate (annual rate divided by 360 or 365, depending on the currency) is used.
- Minimum Interest Accrual:
- If the accrual is less than the minimum unit for the currency (e.g., $1.00), it will accumulate with subsequent accruals until it reaches the minimum before being posted.
- Negative Interest Rates:
- Some currencies (e.g., Japanese Yen) may have negative interest rates applied to balances above certain thresholds.
- Viewing Interest Details:
- You can view detailed interest calculations in your account statements.
- How do I created an Interest Details statement?
- Cash Segment Considerations:
- Interest is typically earned on positive settled cash balances held in the securities segment of an account.
- Cash held in the commodities segment may not earn interest.
Remember that interest rates and policies are subject to change. Always refer to the official IBKR website or contact customer support for the most up-to-date and accurate information regarding your specific account and the currencies you hold.