Interest on Debit trades

[Lee-]

Nope, I think that's not how it works... My bank told me if I paid within the tradedate plus 3 business days I won't be charged interest at all. But if I don't have money after the 3rd day then they will charge me a hefty 21% interest.

What you just said is consistent with what I described. They are concerned with settlement dates. So yeah, you have 3 days.

I'll use an example to make it more clear:

If your purchase on Monday and sell on the same Monday, then both the purchase and sell will settle on Thursday in which case you will not be lacking sufficient funds and will likely avoid the interest fees.

However, if you were to purchase on Monday and sell on Tuesday, then what will happen is your purchase will settle on Thursday and your sell will settle on Friday. You will be charged interest from Thursday to Friday.

What you said in your original post implied that if you sell before the purchase settlement date (Thursday) that you would avoid interest and what I'm saying is that's not the case. It's not enough for you to sell before Thursday -- you actually have to have your sell settle on Thursday, which means you'd have to sell on the same day you made the purchase.

I'm not 100% sure this is how your bank will deal with you as I'm not familiar with how Canada (or your bank) handles these situations. What I described is what would be the logical approach, but of course that's not always the correct approach.

 

[GotherL]

What you just said is consistent with what I described. They are concerned with settlement dates. So yeah, you have 3 days.

I'll use an example to make it more clear:

If your purchase on Monday and sell on the same Monday, then both the purchase and sell will settle on Thursday in which case you will not be lacking sufficient funds and will likely avoid the interest fees.

However, if you were to purchase on Monday and sell on Tuesday, then what will happen is your purchase will settle on Thursday and your sell will settle on Friday. You will be charged interest from Thursday to Friday.

What you said in your original post implied that if you sell before the purchase settlement date (Thursday) that you would avoid interest and what I'm saying is that's not the case. It's not enough for you to sell before Thursday -- you actually have to have your sell settle on Thursday, which means you'd have to sell on the same day you made the purchase.

I'm not 100% sure this is how your bank will deal with you as I'm not familiar with how Canada (or your bank) handles these situations. What I described is what would be the logical approach, but of course that's not always the correct approach.

I see what you mean but I don't think that's how my bank runs or aleast that not how it works when it comes to borrowing money...

I don't have to wait for the settlement date when selling stocks. Whenever I sell the stock that balance becomes available right away in my account.

Do they actually hold your money for T+3 days there in the US?

 

[Lee-]

I see what you mean but I don't think that's how my bank runs...

I don't have to wait for the settlement date when selling stocks. Whenever I sell the stock that balance becomes available right away in my account.

Do they actually hold your money for T+3 days there in the US?

Yes, in the US the funds would be considered "unsettled" and unavailable to withdraw. So if you bought on Monday and sold on Tuesday, your funds would be listed in your account immediately, but as unsettled. You wouldn't be able to withdraw any portion of the unsettled funds until Friday when they would become settled.

 

[GotherL]

Yes, in the US the funds would be considered "unsettled" and unavailable to withdraw. So if you bought on Monday and sold on Tuesday, your funds would be listed in your account immediately, but as unsettled. You wouldn't be able to withdraw any portion of the unsettled funds until Friday when they would become settled.

Arghh..... I am gonna have to check on this with my bank just to be safe!

But I think I should be fine! I borrowed $600 to buy a stock 3 days ago! My balance showed -$600. Then sold it today at the same price for $600 and my balance became 0.

So what I think is even if the funds are unsettled they'd still use that to pay for the balance I owe otherwise that would be sly af.

 

[GotherL]

Yes, in the US the funds would be considered "unsettled" and unavailable to withdraw. So if you bought on Monday and sold on Tuesday, your funds would be listed in your account immediately, but as unsettled. You wouldn't be able to withdraw any portion of the unsettled funds until Friday when they would become settled.

Btw! Are you sure T+3 applies for both Buy and Sell and not just the Buy side?

 

[GotherL]

My bank for instance will allow me to trade with unsettled funds in my registered account( cash only) which I believe in U.S is illegal and called front running I do believe.

Wait, I think he just involuntarily answered that question for the both of us...

I've been daytrading stocks for a month now. I think I even freerided a couple of times without knowing what it was. My bank hasn't flagged me yet or given me any warnings.

 

[dealmaker]

Wait, I think he just involuntarily answered that question for the both of us...

I've been daytrading stocks for a month now. I think I even freerided a couple of times without knowing what it was. My bank hasn't flagged me yet or given me any warnings.

That's because your bank is not up-to par.....