A cash account and a margin account differ in how purchases are paid for, which strategies are permitted and how the broker manages unpaid obligations. This guide concerns US securities accounts; futures, retail forex and overseas accounts have different rules.

Cash accounts: payment and settlement

In a cash account you must pay for securities in full. For most US broker transactions, the standard settlement cycle is T+1, one business day after the trade. Weekends and market holidays matter. Some instruments and transactions follow other schedules.

Suppose you sell fully paid shares on Monday. Those proceeds normally settle Tuesday if both are business days. Your broker may let you buy another security with unsettled proceeds, but selling that new purchase before the funding sale settles can create a cash-account violation. The precise restriction depends on the transaction. Buying without sufficient payment and selling the purchase to cover its cost can constitute freeriding and lead to a restriction.

Use the broker's settled cash figure, and ask how its platform distinguishes settled funds from buying power. A displayed ability to submit an order is not proof that the resulting sequence complies with payment rules. See the SEC's cash-account bulletin and T+1 explanation.

Margin accounts: borrowing and liquidation

A securities margin account can let you borrow against eligible assets, subject to approval and account requirements. Borrowing creates interest expense and magnifies losses as well as gains. Not every security is marginable, and the broker may impose stricter requirements on volatile or concentrated positions.

For a hypothetical purchase of $10,000 in shares funded with $5,000 of your cash and $5,000 borrowed, a fall to $8,000 leaves $3,000 of equity before interest and fees: a 40% loss on your contribution from a 20% price move. This is arithmetic, not a statement that a particular security qualifies for that loan.

The broker may raise its requirements or liquidate assets without first giving you time to meet a call. You can owe more than you deposited. Read the SEC margin-account bulletin and your broker's agreement before enabling borrowing.

Day-trading rules are in transition

Do not choose an account using a universal claim that every US securities day trader needs $25,000. FINRA's replacement intraday-margin framework became effective on June 4, 2026, with firms permitted to transition through October 20, 2027. A broker may still apply the previous framework during that period. Ask which regime it currently uses and how its house requirements apply. FINRA Regulatory Notice 26-10 explains the transition.

A cash account does not provide an unlimited workaround: payment and settlement obligations still constrain reuse of funds. Futures margin is a performance bond under a different framework, not the same securities loan.

Questions before choosing

Compare permitted instruments, interest rates, liquidation rights, settlement displays and any restrictions after a violation. If you do not need borrowing or short selling, understand why you would enable those permissions. A margin account need not use a loan on every trade, but its agreement changes the broker's rights. Becoming profitable for a few months does not by itself make borrowing appropriate.

Risk Disclaimer: Trading involves substantial risk of loss. Past performance is not indicative of future results. See our full risk disclaimer.