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Interactive Brokers Debit MasterCard linked to Brokerage account

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  #1 (permalink)
 Big Mike 
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Hi guys,

Today I received an email from IB:


Quoting 
Introducing Interactive Brokers Debit Mastercard®

Spend and borrow directly against your account(s) U****** with our new Interactive Brokers Debit Mastercard®. Use your card to make purchases and ATM withdrawals anywhere Debit Mastercard® is accepted around the world. Click here to apply today.

BY USING THIS CARD YOU AGREE WITH THE TERMS AND CONDITIONS OF THE CARDHOLDER AGREEMENT AND FEE SCHEDULE, IF ANY. This card is issued by Metropolitan Commercial Bank (Member FDIC) pursuant to a license from Mastercard International. "Metropolitan Commercial Bank" and "Metropolitan" are registered trademarks of Metropolitan Commercial Bank© 2014.

All interest and borrowing activity is through Interactive Brokers LLC. Please see your customer agreement with Interactive Brokers LLC for further details.

Card program marketed and administered by Interactive Brokers LLC, the Program Manager of the Interactive Brokers Debit Mastercard.

I think this is a very useful development in this space.

What do you guys think?

Mike

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  #3 (permalink)
 kevinkdog   is a Vendor
 
 
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I would think this is a nice way to lose the debit card, or it get hacked, and your trading account to be drained...

But maybe that is just me - I refuse to use a debit card, or even have one. I use credit cards for everything.

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kevinkdog View Post
I would think this is a nice way to lose the debit card, or it get hacked, and your trading account to be drained...

But maybe that is just me - I refuse to use a debit card, or even have one. I use credit cards for everything.

Of course. But I've never lost a card in my life.

For me, living abroad, it presents a nice convenience factor of skipping the wire transfers.

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 Big Mike 
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Pointing out the obvious perhaps, but with multiple IB accounts, you can do an internal transfer of whatever smaller amount you wish to the account with the debit card, then go shopping or to the ATM.

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 GFIs1 
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One does not need to withdraw - waiting for the amount hours or days and then transfer it
from the bank account to the credit card - way too long.
What I did not read from the announcement - can you get such a debit card (Mastercard)
worldwide or just US habitants only.

GFIs1

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GFIs1 View Post
One does not need to withdraw - waiting for the amount hours or days and then transfer it
from the bank account to the credit card - way too long.
What I did not read from the announcement - can you get such a debit card (Mastercard)
worldwide or just US habitants only.

GFIs1

Good question, hopefully someone can find out and update this thread.

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  #8 (permalink)
 rleplae 
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I also received the email.
This is a great smart move of IB and I like this additional service.

This will create customer retention (stickyness) based on depth of service as well as allow IB to tap into extra revenues.

The Masterard payment scheme (as is the Visa and some others) is a 4 party payment scheme,
as illustrated in the following diagram :



While IB might not be a principal member of the card scheme, they have teamed up with a party called an 'issuer',
an issuer is responsible for issuing a card and providing card services. IB in this case most likely has a co-branding
agreement. The arrow from Acquirer to Issuer with the Interchange fee, this is a remuneration, that flows from the
acquirer to the issuer (likely to be split with IB)

This move also allows IB to keep the funds longer in their perimeter, because you can move money 'just-in-time'
to where you need it.

I think in some jurisdiction this could become very popular, it allows you make big trading profits and transfer
the profits 'under-the-radar' and spend them on some luxury expenses... This is even better than buying bitcoins...
To be watched closely.

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GFIs1 View Post
One does not need to withdraw - waiting for the amount hours or days and then transfer it
from the bank account to the credit card - way too long.
What I did not read from the announcement - can you get such a debit card (Mastercard)
worldwide or just US habitants only.

GFIs1

Only US

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 rleplae 
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Obelixtrader View Post
Only US

Are you sure ?

I'm not in the US and they know that. Then it' s a very badly targeted mass mailing.

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 Fu510n 
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Despite there being a lot of information out there on how easy it is to hack RFID/chip-enabled cards people still aren't taking safeguards (just check out all the videos on YouTube).

Just make sure to shield them with a sleeve or shielded wallet.

My .02,
-Guy

p.s. I still might considering getting one for my "salary account" if it's easier for withdrawals that way...

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 muttoez 
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The press release seems to suggest it is US only for now.

I have an IB account in Australia and I didn't get an email about this.

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Interactive Brokers Debit MasterCard linked to Brokerage account-ib-besi-press-release.pdf  
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 GFIs1 
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My call with European HQ of Interactive Brokers in Zug, Switzerland
revealed that Debit Mastercard is only for US residents...

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Received my debit card yesterday against my equity PM account. I'll report back on how it works out. Note that in TWS, there is now a row in accounts > balances > pending debit card charges.

Applying for the card was quick, took under 5 minutes as IB already has all your info. Basically just agreeing to the card terms. Regarding card theft, it sounds like there are typical card monitoring protections in place; in addition, for large transactions you would need to pre-approve with your IB 2fa app, so there is that. I'm just happy equity backed borrowing is available to retail customers, where similar offerings have always been available to the super wealthy.

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GFIs1 View Post
My call with European HQ of Interactive Brokers in Zug, Switzerland
revealed that Debit Mastercard is only for US residents...

GFIs1

That is quite unfortunate..

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 GFIs1 
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coccigelus View Post
That is quite unfortunate..


was to hear from the HQ: "If this debit card will be a success in US - then
on further continents the same card might be introduced with local MasterCard
Banks" - just wait - BUT:
Call your IB contact and ask too! This will make them think of the need....


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BTW before to waste time.. What is the % applied for the currency fee exchange ? Example account denominated in $ and purchase done in Euro?

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What is the purpose of debit cards ?

I understand credit cards...

---

I read more carefully Big Mike's 1st post in this thread and I think now I got it

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Scalpguy View Post
What is the purpose of debit cards ?

I understand credit cards...

---

I read more carefully Big Mike's 1st post in this thread and I think now I got it

Far to be an expert in this area.. but c.c. can be issued only from bank.

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 Scalpguy 
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coccigelus View Post
Far to be an expert in this area.. but c.c. can be issued only from bank.

That makes sense.

Anyway now I understand Debit Card is handy while you do not have to make any transfers to your local bank until you can spend your huge trading profits

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Scalpguy View Post
That makes sense.

Anyway now I understand Debit Card is handy while you do not have to make any transfers to your local bank until you can spend your huge trading profits

It is useful especially for foreigners that need to pay bills in different currencies as well without the hassle of international transfers (and additional cost) . In Us people have way better options to spend their money rather than a debit card. Chase or CapitalOne c.c. to mention few. That is why I am thinking that the IB move to offer the debit card only to US citizens is not wise at all.

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 GFIs1 
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coccigelus View Post
BTW before to waste time.. What is the % applied for the currency fee exchange ? Example account denominated in $ and purchase done in Euro?

I assume this works with the actual given currency pair (IB) at the moment you make a transfer.
Same as withdrawing. It is from your IB account - currency is automatic fixed at a transaction moment.
Extra charges should not being applied as it is money from YOUR account - and no CREDIT card nor
credit card company involved.

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 rleplae 
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GFIs1 View Post
I assume this works with the actual given currency pair (IB) at the moment you make a transfer.
Same as withdrawing. It is from your IB account - currency is automatic fixed at a transaction moment.
Extra charges should not being applied as it is money from YOUR account - and no CREDIT card nor
credit card company involved.

GFIs1

I think this is not really true.

1) the card has a base currency denominated (likely here in this case US$

2) if you pay (withdraw or POS payment) in another currency, the mastercard network
will automatically apply currency conversion (rough at the moment of the transaction
autothorization), exactly at the moment of settlement

3) in rare occasions it can be dynamic currency conversion, (which is a legal rip-off)
and the transaction is denominated for example in EU at the point of sale of ATM and
then again converted to US$.

So what is not possible : you have a debit card, when you pay in US$ it goes from you
US$ in IB, when you pay in EU, it goes off your EU account in IB, that is not possible.

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 GFIs1 
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rleplae View Post
I think this is not really true.

1) the card has a base currency denominated (likely here in this case US$

2) if you pay (withdraw or POS payment) in another currency, the mastercard network
will automatically apply currency conversion (rough at the moment of the transaction
autothorization), exactly at the moment of settlement

3) in rare occasions it can be dynamic currency conversion, (which is a legal rip-off)
and the transaction is denominated for example in EU at the point of sale of ATM and
then again converted to US$.

So what is not possible : you have a debit card, when you pay in US$ it goes from you
US$ in IB, when you pay in EU, it goes off your EU account in IB, that is not possible.

Hi rleplae
I think this is a very interesting possibility and a benefit for IB:
exactly that: no card company does it today - for that you need several cards in different currency.
But @ IB trades can be done in every pair of importance - hence one account:
One margin, one real time cash calculation etc.
So I will ask by mail this time at IB HG of Europe - hopefully getting a good answer
which I will post here.

GFIs1

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 muttoez 
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It appears to be a standard debit card arrangement.

This is from the FAQ section:

What happens if I charge something overseas in a non-US currency?

Mastercard converts the currency to US dollars and this is how it appears on your statement.

To convert your transaction's currency to your card's currency, see the Mastercard® Currency Conversion Calculator

The fee schedule confirms that there are no currency conversion fees.

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 Scalpguy 
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muttoez View Post
It appears to be a standard debit card arrangement.

This is from the FAQ section:

What happens if I charge something overseas in a non-US currency?

Mastercard converts the currency to US dollars and this is how it appears on your statement.

To convert your transaction's currency to your card's currency, see the Mastercard® Currency Conversion Calculator

The fee schedule confirms that there are no currency conversion fees.

Sounds logical.

But you can bet they will get their conversion fees by wiiiiiiiiiiiiiide spreads

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 muttoez 
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Scalpguy View Post
Sounds logical.

But you can bet they will get their conversion fees by wiiiiiiiiiiiiiide spreads

They will definitely get you on the spread.

Here is Aus we are used to paying wide spreads with currency conversion on top.

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 GFIs1 
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muttoez View Post
They will definitely get you on the spread.

Here is Aus we are used to paying wide spreads with currency conversion on top.

If you have a IB account you can at the same time
• BUY a Future at Eurex
and
• SELL a stock at NYSE

The first is done in €, the other in $ ON the SAME account
means transferred at time of trade with the thin spreads you get
when you trade currency pairs.

Thus if you debit your card you get the pair needed to the pair to the socond
instead of a day currency pair offered from your BANK with wide spreads PLUS fees

As I interpret the IB intent - they want to have more liquid currency trades - not interested in complicated
calculations with in house spreads and in house fees.

So they let you profit from that direct transactions (Eurex included) on your positive account by using
their debit card to make transactions anytime without big fees and best overview on your IB account.
Only volume counts

GFIs1

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 Grantx 
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GFIs1 View Post
If you have a IB account you can at the same time
• BUY a Future at Eurex
and
• SELL a stock at NYSE

The first is done in €, the other in $ ON the SAME account
means transferred at time of trade with the thin spreads you get
when you trade currency pairs.

Thus if you debit your card you get the pair needed to the pair to the socond
instead of a day currency pair offered from your BANK with wide spreads PLUS fees

As I interpret the IB intent - they want to have more liquid currency trades - not interested in complicated
calculations with in house spreads and in house fees.

So they let you profit from that direct transactions (Eurex included) on your positive account by using
their debit card to make transactions anytime without big fees and best overview on your IB account.
Only volume counts

GFIs1

@GFIs1 can you explain what this means in Lamens terms to a simpleton like me? Will this card enable a person to bypass all the bank fees and spreads?

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 GFIs1 
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Grantx View Post
@GFIs1 can you explain what this means in Lamens terms to a simpleton like me? Will this card enable a person to bypass all the bank fees and spreads?

YES!

GFs1

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 Scalpguy 
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GFIs1 View Post
YES!

GFs1

So you mean it is IB who is making the conversion within their account and they do not charge about the conversion ?

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 GFIs1 
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Scalpguy View Post
So you mean it is IB who is making the conversion within their account and they do not charge about the conversion ?

This is what I think - but lets wait for the official answer of IB HQ on this question.
As long we do not have the opportunity for such card outside US we should make
pressure on IB to get such debit card too.

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  #33 (permalink)
 Grantx 
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GFIs1 View Post
we should make pressure on IB to get such debit card too.

GFIs1

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  #34 (permalink)
 phantomtrader 
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I think it's a good idea - saves you the trouble of transferring funds to your bank account. The only drawback I see is using it in other countries. This summer and last summer traveling in Europe my USAA debit card was denied several times - had to call the bank and get authorization - it's a security procedure from the bank, not the place where I was using it. Their explanation was - if their algorithm triggered because you used the card in an establishment which either wasn't on their list or whatever (I have no idea how their algorithm is written), then you have to call in personally and tell them that it's okay to execute the charge. The purpose is to protect the owner in case the card is stolen - and of course, a lot of military use USAA so that might be a consideration. This didn't happen often, but it did happen. USAA is a big bank. Just wondering how this smaller bank functions in other countries. Just a thought - but I like the idea. I use wire transfer which is $25 - not a lot, but still money.

Ha! Brokerages going in to the banking business a la Goldman Sachs - the next big thing.

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  #35 (permalink)
 mattz   is a Vendor
 
 
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In my opinion, it is a bad idea to borrow against your trading account.
If you need the capital, move it to an interest bearing account, and pay cash without borrowing.

Matt Z
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  #36 (permalink)
 SMCJB 
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mattz View Post
In my opinion, it is a bad idea to borrow against your trading account.
If you need the capital, move it to an interest bearing account, and pay cash without borrowing.

+1

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 TMCap 
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I tend to be hyper-sensitive about access to my trading accounts, and transfers to and from them. I can't see myself getting comfortable with a card being tied to them. I do like to treat them as a separate entity, and I think part of that is because in doing so the money in those accounts is off limits for day to day use. I must take the steps to transfer funds out for my daily use, and I kind of like that rigidity.

That's just my 2 bits of course.

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  #38 (permalink)
 Big Mike 
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I created a poll based on this topic, please vote and discuss:

Would you use a credit card that was tied directly to your brokerage account?

Total votes: 817
 


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  #39 (permalink)
 wldman 
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I have check writing and debit card on eight accounts, including the trading account. The feature makes transfer in and out so easy. In the trading account all business related expenses are run through that check book and debit card to simplify accounting.

Is there any drawback to linking banking to the business account?

Dan

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 mrphr 
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  #41 (permalink)
 sands 
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A lot of mid sized financial services are able to repackage credit/debit card services like this from one of big card providers. It's exactly for client retention through creating depth of offering (as someone has already said).

Security is my concern, as much as we might not lose our cards or data anything out of your control has the scope to be mishandled. Having worked at some of the big firms I wouldn't put it past them losing secure information of any sort either my negligence or with intent. However let's assume that nothing get's lost and it's secure, there certainly is an appeal to those customers that want to expedite access and limit fees associated with traditional transfers especially cross border. But really any layered transaction like this on credit card basis at least is only going to be offered above cost so really what you pay is unlikely any real saving, for the firms providing this kind of service it can be a nice little earner.

Thus imo the bottom line is whether its convenient to you and you're happy with the security.

I prefer same day transfers - liquid enough for me and secure (touch wood).

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  #42 (permalink)
 RossMurray 
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GFIs1 View Post
One does not need to withdraw - waiting for the amount hours or days and then transfer it
from the bank account to the credit card - way too long.
What I did not read from the announcement - can you get such a debit card (Mastercard)
worldwide or just US habitants only.

GFIs1

You have to be a US Resident to have one of these but I asked and was told that they plan to offer to Canadian residents later this year

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  #43 (permalink)
 GFIs1 
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Asked the European HQ of IB

Answer:
"still not available now in Europe".
Asking for by when: "not very soon..."

Now we know

GFIs1

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  #44 (permalink)
LordV
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I got it.
They do have a limit to help with protection. See below.

"Pre-authorization helps us prevent fraudulent use of your card by allowing you to inform us several minutes before making a purchase of $1,000 or more with your Debit Mastercard. Pre-authorization is easy and takes only a few seconds on IB Key"

Edit to include Debit Card FAQs
https://www.interactivebrokers.com/en/index.php?f=26356

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