Anyone who wanted to day trade stocks in a US margin account used to run into the same wall: the $25,000 pattern-day-trader minimum. Make four or more day trades in five business days and you were labeled a pattern day trader, with that $25,000 floor attached. For small traders, a cash account was the usual way around it.

That wall is coming down. The rules changed this year, and the change reshapes the old question of whether to open a cash account or a margin account. Here’s what’s different, what stays the same, and how I’d think about the choice now.

What the new rules do

On April 14, 2026, the SEC approved FINRA’s new intraday margin standards. They took effect June 4, 2026, and brokers have until October 20, 2027 to implement them.

Under the new standards, the $25,000 pattern-day-trader minimum is eliminated, along with the pattern-day-trader designation itself. Day trades are no longer counted. In their place, eligible margin accounts with more than $2,000 get intraday margin buying power, which each broker sets based on the positions in the account and their maintenance requirements.

Brokers will monitor for shortfalls either in real time or at the end of the day. Firms that watch in real time can block a trade before it goes through if it would put the account into an intraday deficit.

Note what the new system puts in the broker’s hands. The $25,000 figure was one number that applied everywhere. Intraday buying power will now be a calculation each firm makes from your holdings and their maintenance requirements, so two brokers may show different buying power for an identical account. If you trade actively, it’s worth asking your broker how it calculates the figure and whether it checks in real time. At a real-time firm, an order that would push you into a deficit may simply be rejected at the moment you place it, which can be a surprise in a fast market.

Your broker’s timeline is what counts

Because firms have until October 2027 to phase this in, the rule you live under depends on where your account sits. Schwab stopped counting day trades on June 8, 2026. Other brokers may still be applying the old limits. Before you change how you trade, check your own broker’s announcements or ask its support team directly. I keep a running list of changes like this on the BrokerNimble what’s-new page, and the wider context is in The Great Broker Shake-Up of 2026.

How a cash account works

A cash account is the simplest arrangement in investing. You can only buy with money you’ve deposited. There’s no borrowing, no short selling and no margin call, and for stocks and ETFs you can’t lose more than you put in.

The one rule that catches people is settlement. Since May 2024, stock trades settle T+1, meaning one business day after the trade. Until a sale settles, the proceeds are unsettled funds. You’re allowed to buy with them, but if you then sell that new position before the original sale settles, you’ve committed a “good faith violation.”

Here’s how it plays out. On Monday morning, a hypothetical trader sells shares of one stock. That sale settles Tuesday. On Monday afternoon she uses the proceeds to buy a second stock, which is fine. If she sells the second stock later that same Monday, before Tuesday’s settlement, that’s the violation.

For an active trader, this is the real limit of a cash account. Your money cycles once per business day.

How a margin account works

A margin account lets you borrow from your broker against the securities you hold. You need at least $2,000 in equity to open one. Under Regulation T, you can initially borrow up to 50% of the purchase price of a stock.

Once you own the position, a second number takes over: the maintenance requirement. FINRA sets the minimum at 25% of the market value of the securities, and many brokers set their own at 30% or higher. If your equity falls below that line, you get a margin call, and the broker can sell your positions to cover it, without notice.

Interest is charged daily on whatever you’ve borrowed, at rates that vary enormously from one broker to the next. I laid out how wide that range has become in Your Broker May Be Charging You Double to Borrow, and the current figures are on the BrokerNimble margin rates table.

Margin accounts also make it possible to short stocks and, with the right approval level, to trade more advanced options strategies.

How fast a margin call arrives

Numbers make the risk concrete. Suppose an investor has $20,000 and uses the full 50% Regulation T allowance to buy $40,000 of stock, borrowing $20,000.

Her equity is the market value minus the $20,000 loan. At a 25% maintenance requirement, she gets a call when equity drops below a quarter of the market value. That happens when the position falls to about $26,667, a decline of roughly 33%. At that point her equity is about $6,667, or 25% of $26,667.

If her broker uses a 30% requirement, the trigger comes sooner: at about $28,571, a decline of roughly 29%. Her equity at that point is about $8,571.

At the 25% level, a one-third drop in the stock has cut her own money by two-thirds, and the broker may be selling for her at the worst moment.

So which should you choose?

The new rules remove the main reason small active traders avoided margin, and the risks of borrowing stay exactly as they were. A few ways to think about it:

  • Long-term investors who never borrow lose little with a cash account. Settlement rarely matters if you buy and hold.
  • Active traders with more than $2,000 gain the most from the change. Once your broker implements it, the old day-trade count is gone, and good faith violations are a cash-account rule. The trade-off is that the account can borrow, so you have to watch it.
  • Anyone who wants a hard ceiling on losses may still prefer a cash account. The inability to borrow is a feature for some people.

Some investors open a margin account and simply avoid carrying a loan, which removes settlement limits while keeping interest at zero. The discipline has to come from you, though. The buying power will be sitting right there on the screen.

A note on futures

Futures accounts follow a separate rulebook. Futures margin is a good-faith deposit, with no loan and no interest charged on it. If that’s where your trading is headed, my explainer on how futures margin works covers the mechanics.

For the full picture on account types, fees and platforms, see my guide to choosing and using a broker in 2026.

Disclosure: Peter Agro runs BrokerNimble.com, an independent broker comparison site that plans to join broker affiliate programs and may earn referral fees in the future. Figures were checked in October 2026 and change often; confirm current terms with the provider. This article is for information only and is not investment, tax or legal advice. Futures, margin and options trading involve substantial risk of loss, including losses greater than your deposit.