Posted in Finance, Accounting and Economics Terms, Total Reads: 346
Definition: Free Credit Balance
The cash which is provided to a customer in his account by a broker and can be withdrawn by the customer without any restriction is called free credit balance and the amount of total money remaining in customer account is called margin balance.
This amount can be used for meeting short sales thus increasing the returns to a client. The broker charges interest on this amount from the client and the client’s buying power increases because of this.
The short selling technique is most common use of free credit balance. Companies also use this account to meet any short term lending working capital requirements.