Jon: <<Are you SURE they are doing this?
Yes. 100% positive. You can pick up the phone, and call their Portfolio Dept. (Ext. #9). Every single person you talk to will tell you they charge 7% interest on short position on margin. When I asked them when did they start to do that, one person told me that they started to do this since last Oct. But other people told me that since Day One. From my account, they started to do this at least since last July because I was charged 7% on short on margin in July. I haven't had any short position bet. last August and Feb. 25. So I haven't made a big deal out of it. But since this late Feb., I initiated some short position, and ever since then, I tried to clarify whether they do charge 7% interest on short position. After talking to over a dozen of they customer representatives, and got my Feb. statement, now I know for sure they DO CHARGE 7% INTEREST on any amount above your cash balance. It DOES NOT MATTER whether you are short or long, 7% interest, period.
They even told me that they are not the only one do this, etc., which is true. I asked Trading Direct on the phone and they said they do too, 8%. Datek even told me E-trade starts to charge interest on short position too, but I haven't checked with them myself. Even that is true then it will be even more terrible because E-trade margin interest is 9.5%.
My point is that all the customers have the right to know upfront. They should not do it in this kind sneaking way. I asked this to at least 2 people in Datek, one of them even went to look for this info on their site because he told me that this info is on their site. But then came back to me and told me they haven't posted this info yet. But they started to practice this ever since last July, or may be Day One. Who Knows? I guess very few customers pay attention to this.
What you should pay attention is that to make sure they do not charge you 7% interest on the whole amount of short proceeding, including your cash balance. This exactly happened to me. I still haven't got the problem solved. The way to find out this is that as long as there are your own real cash balance among the short proceeding, you should get 4% interest, even if a few bucks. If there is none, then that means they count your own cash balance as the margin so they are charging you the interest on your own cash!!!!!!!!!
Well, as far as myself concerned, I stop using margin overnight now. I would rather borrow from Credit card company. Their interest is higher, but I know how they calculate, and they are the true interest. In Datek, they claim 7%, but you end up paying much HIGHER than that.
Sue them? As a small investor, where do I have the time and financial resource to fight with them??
GOOD LUCK. and Thanks for giving me some feedback. This must be the 10th message I posted on this matter and your are among the very few who ever pay attention. |
