Debit balance

The term debit balance refers to the amount an investor owes to a broker.

A debit balance may come about as stocks and other securities are bought on a margin basis. The debit balance is usually connected to the amount on the margin account. Interest is charged while the amount owed is on the margin account.

The debit balance incurred by borrowing on margin is repaid depending on the conditions which have been set by the brokerage firm. Of course, such regulations are based on government rules, but the brokerage also has the right to impose additional conditions of its own. Usually, investors with high credit ratings are given more allowances and concessions, whereas those with lower credit ratings have to contend with stricter conditions, such as smaller margins and rigid repayment schemes.

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