Instead of maintaining a positive balance in a bank checking account that pays virtually no interest and having to worry about overdrafts, switch your bill payment to a brokerage account that offers low margin rates, and pay your bills “on margin”. (Interactive Brokers currently offers 1.55% (for loans <$100k), or negotiate with your current broker (I got 0.75% starting at the first dollar)). Once a while, sell some securities, move money back from a high yield savings account or CD, or get cash from box spread financing, to zero out the margin balance.
This can prevent you from being able to deduct the interest as investment interest expense on your taxes due to interest tracing rules (you have to show the loan was not commingled with non-investment funds in an audit), and create a recordkeeping nightmare at tax time.
Pay your monthly bills with margin loans
Instead of maintaining a positive balance in a bank checking account that pays virtually no interest and having to worry about overdrafts, switch your bill payment to a brokerage account that offers low margin rates, and pay your bills “on margin”. (Interactive Brokers currently offers 1.55% (for loans <$100k), or negotiate with your current broker (I got 0.75% starting at the first dollar)). Once a while, sell some securities, move money back from a high yield savings account or CD, or get cash from box spread financing, to zero out the margin balance.
This can prevent you from being able to deduct the interest as investment interest expense on your taxes due to interest tracing rules (you have to show the loan was not commingled with non-investment funds in an audit), and create a recordkeeping nightmare at tax time.