What is a Credit Balance?

Mary McMahon
Mary McMahon

A credit balance is the amount left in a cash account with a securities broker after a deal is executed on the client's behalf. The credit balance includes the margin amount the client is required to maintain on hand, along with proceeds from sales, dividends, and other financial activities. Brokers are required to provide statements to their clients detailing their credit balances and providing information about how their accounts were used during a given accounting period.

Man climbing a rope
Man climbing a rope

A closely related concept is the free credit balance. The credit balance refers to the total amount of money in a cash account, but people cannot actually access all this money, unless they are planning on closing out their accounts, in which case any remaining fees and bills will be deducted and the remainder will be paid out. The free credit balance reflects the amount of money the customer actually has to work with, the funds available for use in investments and other activities.

It is also possible to have a debit balance, in which case a call from the broker will probably occur. People may end up owing their brokers if a deal does not go as planned and brokers can issue what is known as a margin call, asking the investor to either deposit more cash into the account or to turn over securities in order to meet the margin requirements. Margin requirements are used as a form of protection by brokers to ensure the availability of funds to back deals executed on behalf of a client.

The total of someone's credit balance can fluctuate. Various policy requirements at the broker's, such as margin requirements, can alter the amount of money that should theoretically be in the account at all times. When people earn money on their securities, these funds are deposited into the cash account, and when purchases are made, funds are deducted. While the broker controls the cash account, the funds officially belong to the client and the broker must use the funds responsibly.

Most investors do not wait for statements from their brokers to find out about their credit balances. People can call their brokers at any time for an update. These updates are used to determine how much free credit is available, and to prepare for requests to sell or transfer securities to meet margin requirements. Being aware of the amount of funds available for investment activities is important for people meeting with their brokers or agents to discuss possible purchases.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments


Having to owe your broker money, beyond his commission fees is one of the worst things I have ever had to go through as an investor. I made some bad investment decisions, and I lost money.

The margin requirements on my account were pretty high, so I had to pay back quite a lot of money to my broker so I can meet those requirements. Maybe I should find another broker or investment firm. Just in case I make another bad decision, I do not want to have to pay a large sum of money just so my firm can be happy.


An investor should always keep track of his or her own records and credit balance. Do not rely on your broker for information about your money. Always keeps your own records so that you can have something to compare the broker's records to.

I made the mistake of not keeping my own records and putting to must trust in my broker to manage my money. He said that my credit balance was one thing, and it turned out he was wrong. After he made an investment, he called me up to say that he had miscalculated my balance, and that I ended up investing in a stock with more money than I actually had. It was a nightmare.

When dealing with a broker, realize that it is your money, not theirs. Take an active interest in your investments and keeps your own records.

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