Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (2023)

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Interactive Brokers stands out in offering some of the lowest commissions and margin rates we've seen, which makes it a solid option to consider for stock trading. In this Interactive Brokers review, we’ll explain how the online stock broker compares on key factors we think are most important to consider before opening an account. Find out more about the pros and cons below.

Ratings Methodology

Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (1)

Interactive Brokers

Our Rating:

Rating image, 4.0 out of 5 stars.Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (2)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (3)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (4)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (5)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (6)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (7)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (8)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (9)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (10)Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (11)

4.0 stars

Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (26) = Poor

Bottom Line

A great low cost option for small trade volume. While the interface isn't as clean or modern as other brokers, it get's the job done. Interactive Brokers is also a great choice for options investors, traders, and those trading on margin.

Fees:

As low as $0 stock trades

Account Minimum:

$0

Full Interactive Brokers review

This stock broker is a good fit for: Some investors, and more frequently traders, trading on margin. Interactive Brokers' margin rates easily trounce much of the competition.

Top perks

Designed for active traders and sophisticated investors, Interactive Brokers may not be the best online stock broker for everyone. However, it does have some killer features that make it stand out from the pack.

Low commissions

The IBKR Lite platform offers zero-commission stock and ETF trades. Higher-volume traders on the IBKR Pro plan can enjoy a standard commission rate of one-half cent per share ($1.00 minimum per trade), or a tiered commission plan starting at just $0.0035 per share ($0.35 minimum per order). Interactive Brokers offers pricing designed for investors and traders who want to minimize the cost of trading.

Low margin rates

Interactive Brokers’ margin rates are substantially lower than most of the competitors we've reviewed. Whereas many brokers price the first dollar of margin at an interest rate in excess of 10%, margin loans from Interactive Brokers cost half as much. The difference really adds up, particularly for investors who carry large margin balances for long periods of time.

International trading

While virtually all brokers enable you to buy foreign stocks that have a listing on a U.S. exchange, few enable customers to trade directly on markets outside the United States. Interactive Brokers' Trader Workstation offers access to more than 150 markets around the globe, several times more markets than any other discount brokerage firm.

Powerful platform

Trader Workstation is a powerful desktop trading platform, especially when you consider that it is free. It truly has something for everyone, whether you trade stocks, ETFs, options, futures, or currencies. And there's also two mobile options, depending on your needs. The flagship IBKR Mobile app is feature-rich and full of data, giving you much of the same functionality as the desktop TWS platform. The streamlined IBKR GlobalTrader mobile app offers a clean interface for simple stock and crypto trades on the go without the clutter.

No-transaction-fee mutual funds

To be a top stock broker, no-fee mutual funds are practically table stakes. Interactive Brokers, rightly, offers a wealth of mutual funds that can be purchased with no fee.

TIP

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What could be improved

Complicated pricing structure

Interactive Brokers transparently outlines its fees for its IBKR Pro and IBKR Lite offerings, yet they are more complicated to understand than other stock brokers, regardless of trading frequency and account size. Our commission overviews below will help you decipher the fees you may encounter.

Free research

Some of Interactive Brokers research tools are only available for a fee. Admittedly, these tools are useful, we just wish they were free.

Alternatives to consider

If you want a less complicated pricing structure and a mobile-only experience: Robinhood is as simple as they come for pricing and mobile trading. The stock broker includes $0 commissions for stocks, options, and ETFs, as well as commission-free crypto trades.

If you're not an active trader and don't rely on margin: Merrill Edge® packs in a diversified set of offerings that competes with the best brokers, making it a great one-stop shop that's easier to trade with than Interactive Brokers.

Offer

Merrill Edge® Self-Directed

Robinhood

Rating

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4.5 stars

Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (53) = Poor

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4.5 stars

Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Interactive Brokers 2022 Review: Pros, Cons, and More | The Motley Fool (78) = Poor

Commissions$0 for online stock and ETF trades$0 for stocks, ETFs, options, and cryptocurrencies
Account Minimum$0$0
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Commission prices

Before we get into a discussion of Interactive Brokers' pricing, it's important to mention that there are two pricing plans from which customers can choose.

IKBR Lite: The IBKR Lite plan has commission-free trading but is lighter on features and has higher interest rates for margin loans. For options trading, the IBKR Lite plan offers a flat commission rate of $0.65 per contract. The IBKR Lite plan is sufficient for the needs of most U.S. investors.

IKBR Pro: The IBKR Pro plan is intended for frequent and professional traders and charges significantly lower rates on margin loans. It offers more features while charging significantly lower rates on margin loans. IKBR Pro users can utilize the fixed or tiered commission plan.

Stocks and ETFs

IKBR LiteIKBR Pro (Fixed)
$0, no minimum$0.005 per share, $1 minimum

For the tiered plan, commissions start at $0.0035 per share with a $0.35 minimum per order for those with a monthly trade volume of 300,000 shares or less. Users with higher monthly volumes receive reduced commission rates. Only shares that are traded while under the tiered plan will count towards the monthly share volume.

It's also worth noting that both the fixed and tiered IBKR Pro plans offer access to the company's SmartRouting order system, which the company claims improves trade pricing by $0.47 per 100 shares versus the typical brokerage. So, while the platform charges commissions, this could help to offset it.

Mutual fund commissions

No transaction fee fundsIKBR Transaction Fee
Over 18,000 mutual funds can be purchased with no transaction feeOther mutual funds are charged the lesser of $14.95 or 3% of trade value

Options commissions

IBKR Lite users pay a flat $0.65 fee per contract with a $1 per-order minimum.

IBKR Pro users have a variable pricing structure based on monthly contract volume. The following table shows commissions based on monthly volume of 10,000 or less.

Options priceCommission
$0.10 or more$0 per trade, $0.65 per contract
$0.05 to $0.09$0 per trade, $0.50 per contract
$0.05 or less$0 per trade, $0.25 per contract

All trades have a $1 minimum per contract charge

Cryptocurrency commissions

Monthly trade valueCommission
≤ $100,0000.18%
$100,001.01 to $1,000,0000.15%
>$1,000,0000.12%

Minimum $1.75 commission per order, but no more than 1% of trade value

These rates are fairly competitive with most other crypto exchanges, especially in the high value tiers. Investors who trade crypto at lower volumes, however, may end up paying more with Paxos / Interactive Brokers due to the minimum $1.75 commission per order.

While the commissions are received by Paxos, Interactive Brokers receives a portion of the commission fee as a referral. Should you be charged a commission exceeding 1% of the trade value, you'll receive a rebate from International Brokers to reduce your effective commission rate to the lesser of the rate in the table or 1% of the trade value.

Buying mutual funds

Interactive Brokers may be built for active stock traders, but it doesn’t leave fund investors behind. It offers more than 46,000 mutual funds, of which more than 18,000 can be purchased without paying its standard transaction fee.

Total mutual fundsMore than 46,000
No-transaction-fee mutual fundsMore than 18,000

Buying cryptocurrencies

Interactive Brokers offers customers the ability to trade crypto through a partnership with Paxos Trust Company. You can open a Paxos account and trade a variety of currencies, including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH). With their Paxos account, users can trade crypto 24/7, hold both cash (in USD) and crypto, and access additional order types. Commission fees operate on a tiered scale based on your monthly trade value.

While Paxos operates as the crypto exchange, customers can access their crypto and make trades from within their Interactive Brokers trading platform of choice. This includes IBKR GlobalTrader, Interactive Brokers's mobile app. You can also choose to trade through the Paxos web application.

Fees you should know about

Because Interactive Brokers is designed for active traders and sophisticated investors, it has a few quirks in its list of fees that warrant additional discussion.

Options exercise and assignment fees: The best options trading brokers should help active traders cut costs. Interactive Brokers delivers on this front and doesn’t charge an extra fee to exercise an option you own, nor does it charge a fee if an option you sold is assigned. Many brokers charge for options exercise and assignment. Interactive Brokers options fees are among the best for people who expect to exercise options, or have them assigned.

Research fees: We’ll address this later in more detail, but for now, we should note that Interactive Brokers has a la carte pricing for many popular research and news tools. Though some are offered for free, many more come with a monthly subscription fee.

Trading platform

Customers will find that Interactive Brokers has several different trading platforms designed for the needs of active traders and long-term investors alike. Its platform earns high reviews from active traders who appreciate access to a fully-featured trading platform on their desktop.

Here are the platforms Interactive Brokers has to offer:

Client Portal: Interactive Brokers' modern and user-friendly desktop trading platform. This is the easiest way for an investor to log in and place a trade on the platform. But all clients (IBKR Pro and Lite) have access to all three of these.

IB Trader Workstation (TWS): TWS is a fully-featured desktop trading platform that offers all the functionality (and more!) that investors have come to expect from desktop solutions. Fully customizable, you can design your screen how you want to. Its watch list feature can include an extraordinary amount of information on every stock, from its P/E ratio to how many days it takes the company to sell its inventory, on average. TWS is chock full of screeners, stock option analysis tools, and backtesting options.

Mobile platforms: Interactive Brokers also offers IKBR Mobile, a powerful mobile application for iOS and Android devices. The app offers streaming data, charting tools, and the ability to place even the most complex trades from a mobile device. With access to over 150 worldwide markets, mobile users will find that there are no limitations on their ability to trade from the palm of their hand.

For a more streamlined mobile experience, the newer IBKR GlobalTrader app provides a clean interface with minimal data overload. Users can access 90+ worldwide stock exchanges, as well as trade options in 30+ market centers. There's also the ability to trade cryptocurrencies -- including Bitcoin, Ethereum, and Litecoin -- from anywhere, 24/7.

As long-term buy and hold investors, we don’t necessarily make full use of all the bells and whistles of a fully-featured trading platform. Frankly, the impressive functionality offered by its desktop platform, IB TWS, can be as much of an advantage for active traders as it is a disadvantage for inexperienced investors.

New investors seeking a good stock broker for beginners may be put off by all the moving parts of its desktop platform. Even the basics can be overwhelming since the platform is built to offer access to so many different markets. For example, after entering a ticker symbol for a popular ETF, the platform prompted us to select whether we wanted a quote for the stock, options, or futures contracts based on its value. It’s simple to navigate, but new investors may be lost in the shuffle.

In these cases, the simplified GlobalTrader app may offer a welcome reprieve from the more robust features of the highly functional TWS platforms. It's a nice addition to Interactive Brokers's offerings.

Interactive Brokers margin rates

Interactive Broker's margin rates are some of the lowest we've come across. Here's a rundown of its effective margin rates by margin balance.

Margin BalanceIBKR Pro AccountsIBKR Lite Accounts
$0 - $99,9994.58% (BM + 1.5%)5.58% (BM + 2.5%)
$100,000 - $999,99994.08% (BM + 1%)5.58% (BM + 2.5%)
$1,000,000 to $49,999,9993.83% (BM + 0.75%)5.58% (BM + 2.5%)
$50,000,000 to $200,000,0003.58% (BM + 0.5%)5.58% (BM + 2.5%)
$200,000,000+3.58% (BM + 0.5%)5.58% (BM + 2.5%)

Source: Interactive Brokers; BM = benchmark rate

It’s safe to say that margin lending is Interactive Brokers’ special sauce. Most competing discount brokers charge two to three times more for margin loans than Interactive Brokers. If margin is central to your trading or investing strategy, its low interest rates may alone be a reason to put it on the short list of brokers to choose from.

With IBKR Pro, margin rates decrease as you borrow more, and IBKR Pro customers receive lower margin rates than IBKR Lite customers do at all balance levels.

The list above is indicative of the brokerage’s focus on high value accounts, financial professionals, and active traders. Few brokers even bother to publish margin rates for amounts in excess of $2 million-$5 million. That Interactive Brokers publishes margin rates for loans in excess of these amounts says a lot about the service from the get go.

Interactive Brokers also deserves some praise for using a clear and easy-to-understand method for calculating its margin interest rates. The brokerage uses the Federal Funds Effective Overnight Rate as its benchmark rate before adding a marginal spread. In comparison, many other brokers substitute their own proprietary benchmark to calculate interest charged to customers who have a debit balance.

Customer service and support

Primarily an online brokerage, Interactive Brokers doesn’t have a large branch footprint like many of the largest retail discount broker firms. That said, it offers support 24 hours a day by phone, chat, or a secure message through its account center.

Research and screeners

This brokerage offers a wealth of research, with a catch: Not all of it is free, as certain research providers charge a flat-rate monthly subscription fee for access. We’ll explain in more detail. For now, we’ll focus on what is free:

  • News: Interactive Brokers offers news and reports from 24/7 Wall Street, a daily brief from Dow Jones, and reports from Market Realist, just to name a few news and research providers. It also offers Social Sentiment data from MediaSentiment, showing you whether investors are bullish or bearish about particular stocks or events on social media platforms. You can even get real-time updated crypto news from The Tie, Coin Metrics, and Benzinga.
  • Mutual fund/ETF replicator: This tool is really valuable for fund investors. It enables you to enter a ticker symbol to find mutual funds and ETFs that offer a similar performance profile. For example, I typed in a ticker symbol for an actively-managed mutual fund, and it suggested an index fund with similar performance at a lower expense ratio.
  • Market scanner: This tool is excellent for finding investments based on fundamental and technical parameters. If you want to find stocks that pay a dividend of more than 2%, have a P/E ratio under 20, and are based in Angolia, you can do it with a few clicks. The depth of its screening tools is really remarkable.

We haven’t even scratched the surface of what Interactive Brokers has to offer in free news and screeners -- going through every tool would take hours, if not days -- but it’s certain that it ranks among the top of the list as far as its screening tools go.

Of course, there’s a downside: Research you might expect to receive for free at other brokers isn’t free at Interactive Brokers. For example, many brokers offer Morningstar equity research reports for free, but Interactive Brokers’ non-professional customers pay per month for the service. That said, a la carte research and news options are plentiful, and many offer a free trial so you can see what you’ll get before you commit to a monthly charge for access.

This brokerage account is right for you if:

If the following statements apply to you, Interactive Brokers should make your short list of places to open a brokerage account.

  • You want to keep expenses low. Low commissions make IBKR Pro a compelling value for people who make frequent stock and options trades and want premium pro-oriented features. And the no-commission IBKR Lite plan is a great fit for less-active investors as well.
  • You use margin. Low margin rates are one of Interactive Broker's biggest strengths. It's no surprise that Interactive Brokers has the largest amount of margin loans outstanding of any discount broker we've seen -- the savings are simply too big to ignore.
  • You don't need hand holding or vast (and free) research. Interactive Brokers is unapologetic about catering to active traders, financial professionals, and sophisticated individual investors, which is reflected in its a la carte options for paid research. That its average client trades more than 300 times per year says a lot about the kinds of traders and investors who tend to gravitate to Interactive Brokers.
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