What is a Debit Balance?
The debit balance is the amount owed by an investor to a broker. Often, the balance is associated with the current amount the investor owes that is posted to a margin account. The debt is created due to the purchase of stocks, bonds, and other securities on a margin basis. As long as a debit balance exists in the margin account, the investor is charged interest on the outstanding balance. When an investor chooses to purchase securities on a margin, a broker establishes what is known as a margin account in the name of the investor. Essentially, a margin account is a line of credit that is extended to the investor via the broker. This credit line can be used to purchase stocks and other securities without having to use the financial assets of the investor to make the purchase. When the securities are purchased on a margin, the amount of the purchases is debited to the margin account, creating a debit balance. Repayment of the debit balance depends on the terms and conditions set by the b
