Interactive Brokers Review 2023: Pros & Cons
(Disclosure: Some of the links below may be affiliate links)
Are you looking for a great broker? Look no further!
Interactive Brokers has all the features you need as a passive investor. Plus, their fees are almost unbeatable in the industry.
I have been using IB for several years and could not be more satisfied. They offer a wide range of products at excellent prices.
In this review, you find all you need to know about Interactive Brokers, what you can do with IB, how much IB will cost you, and much more!
By the end of this review, you will know whether IB is a good broker for you!
| Custody Fees | 0% per year |
|---|---|
| Inactivity Fees | 0 CHF |
| Buy Swiss ETF | 5-15 CHF |
| Buy American Stock | 0.50 – 1 USD |
| Currency Exchange Fee | 2 USD |
| Languages | English, French, German, and Italian |
| Mobile Application | Yes |
| Web Application | Yes |
| Custodian Bank | 8 different US banks |
| Established | 1978 |
| Headquarters | United States |
What is Interactive Brokers?
The broker you need to buy stocks and ETFs reliably and at extremely affordable prices. Trade U.S. stocks for as little as 0.5 USD!
- Extremely affordable
- Wide range of investing instruments
Interactive Brokers (IB) is a well-established brokerage firm (a broker) from the United States. IB was founded in 1978 already.
Today, Interactive Brokers is a huge brokerage company. They are the largest electronic brokerage firm in the United States. They are also leading the forex broker market. IB is also profitable, with over one billion US dollars in yearly revenue. IB employs more than 1500 employees worldwide.
IB offers access to stocks, bonds, options, futures, and other financial instruments on the leading stock exchange in the world. You will have access to all the investing instruments you will ever need.
So, here is precisely what IB offers as a broker.
Interactive Brokers Account Types
Interactive Brokers offers two types of accounts.
The default account type is the Cash account. With this account, you can only trade with the money you have in the account. It is the account type I am using and the one that is good for most people.
The other account type is the Margin account. With this account, you can trade on margin. It means that you can buy stocks with money you do not have. So, IB will lend you money to trade on the stock market. And you will pay interest on the money loaned to you.
Generally, with margin, you have a certain level of margin. For instance, if you have 10K cash and a 4:1 margin, you will have 40K available.
If you are interested in margin accounts, you should first read IB’s page on Margin accounts. And you should be careful about the risks of trading on margin.
For most people, a Cash account will be the best choice. If you do not know about margin accounts, do not consider getting a Margin account. You could lose a lot of money if you do not know what you are doing. On the other hand, if you know what you are doing and want to use leverage, you can choose a Margin account.
Interactive Brokers Fees
In the long term, you need to reduce your fees. Investing fees are extremely important.
Interactive Brokers has two fee systems:
- Fixed Fee System
- Tiered Fee System
The fixed fee system is straightforward. You will pay a fixed fee for each exchange. For instance, you will pay 0.10% on transactions on the Swiss Stock Exchange (with a minimum of 10 CHF).
The tiered fee system is much more complicated. You will pay all the individual fees, such as clearing fees, trade reporting fees, and transaction fees. And the rules are different for each stock exchange.
Many people are turned away by the complexity of the tiered fee system. But for simple investors, the tiered system is often significantly cheaper. In most of my calculations, the tiered fee system was less expensive than the fixed system. So, if you want the lowest fees possible, you should generally opt for the tiered system.
I will not go into details about all the fees of Interactive Brokers because they are complex. But overall, the fees of IB are really low. For instance, here is a comparison I did for the best brokers in Switzerland:
When you compare IB with other brokers available in Switzerland, we can see that the fees of Interactive Brokers are excellent. If you trade a few times per month, your costs will be really low!
Custody / Inactivity Fee
Fortunately, there are no custody fees or inactivity fees at IB!
Having no custody fee is an excellent advantage of IB compared to most other brokers. Not only do they have outstanding transaction fees, but having no custody fees is fantastic!
Cash Interest Rates
In the past, there was a negative interest rate on CHF cash. However, since 2023, the interest rate has been growing steading.
In August 2023, the interest is now 0% up to 10’000 CHF and 0.726% on cash more than 10’000 CHF. This is a good interest rate. And the interest rate in USD is now 4.830% simultaneously. This is very high interest.
You can get the current interest rate on this page.
Opening an account with Interactive Brokers
Opening an account with Interactive Brokers is not complicated, but it will take some time. The procedure asks many questions and has many steps.
First, they will ask for general information about you (name, address, and such). You will also need to select the type of account you want. This choice is essential. This step is also where you will choose the base currency of your account.
The second step of the procedure is to give financial information. IB will ask you how much money you have and how much experience you have with stocks. And you will have to choose which instruments you want to invest in. Do not worry too much since you can register for new investing instruments later.
The next step is about accepting the terms and conditions of Interactive Brokers. I would recommend at least skimming through them. After this, they will ask for proof of your identity and extra tax-related information.
Finally, you only need to fund your account for it to be complete. While this is not the most straightforward procedure, I do not think this is too complicated.
If you want more information on the process, I have a guide on creating an Interactive Brokers account.
Sub-accounts
It is worth mentioning that you can have sub-accounts in your Interactive Brokers account. It means that you can manage several accounts in the same primary account.
The best usage of sub-accounts is if you want to invest for your children and easily separate your stocks from theirs. Legally, the stocks are still yours since you cannot create accounts for minors. Nevertheless, it is good to see them separate. I have bought a share of VT every month for my son.
If you want more information, I have an article about investing in stocks for your children.
Using IB to trade
Interestingly, IB has many user interfaces:
- The standard web application
- The mobile application (IBKR Mobile)
- The WebTrader web interface
- The Trading Workstation (TWS) desktop application
So, there should be an interface for everybody!
You can do most things from all interfaces. For instance, you can trade stocks from each of these interfaces. The problem with IB is that many people have been discussing the TWS interface. So, many beginners believe they should use it. But the TWS interface is the most complicated of these interfaces by far.
I have never used the TWS application for trading. It is just too complicated for most investors. You only need the Account Management interface if you are a simple investor and invest in ETF. You can also use the IBKR Mobile application to trade if you prefer phones.
From account management, you can trade everything you want. And you can also transfer money to and from your account. All these operations are relatively simple.
You can fund your account for free with a bank transfer. First, you must declare your bank account in IB, and then you can make a deposit. Withdrawals are working in the same way. You can only send money to accounts in your name. I never had any issues with either deposits or withdrawals.
It is also worth noting that you can automate your investments with IB. With that, you can set up standing orders starting weekly or monthly. That way, if you use a recurring order for the transfer, you can entirely automate your investments. This feature is something some people are looking for.
If you want more information, I have a guide on how to fund your IB account and trade an ETF.
Other features
IBRK has some other interesting features.
I would especially like to mention the Stock Yield Enhancement Program. If you enable this option in the settings, IB can lend your shares to other investors.
I like that IB shares 50% of the profit with you if you use that option. This sharing starkly contrasts with other brokers that would lend your shares by default without giving you any profits.
I am not saying everybody should enable this option, but for me, this shows that IB is a great broker.
Another interesting feature is that you can trade fractional shares. This feature allows you to buy fractions of shares. This feature is helpful if you want to buy some expensive shares or if you want to purchase many different companies without having a large portfolio. You can read more about fractional trading at IB.
Is IB safe?
You want your broker to be safe if you invest significant money. So, we must look at the safety and security of IB.
Regulations
First, we can take a look at regulations.
Depending on the customers’ country, Interactive Brokers has seven legal entities. For instance, Interactive Brokers LLC works in the US, while Interactive Brokers (UK) Limited works for European clients.
Each of these entities is regulated. For instance, the US Entity is regulated by the Security Exchange Commission (SEC), and the UK entity is regulated by the Financial Conduct Authority (FCA). So, overall, IB is extremely well-regulated.
Financial Strength
Currently, Interactive Brokers is considered very strong financially. They have a strong capital position and advanced risk controls.
The company manages over two million accounts and executes almost two million daily trades. These are substantial numbers showing that IB has many active users.
In April 2023, IB had over 7 billion USD above the regulatory capital they needed. The company invests mostly in the short term to ensure it has enough money to cover issues in the short term. So, IB’s money is not locked when it needs to be available.
Overall, Interactive Brokers’ financials are good. The company has not been showing any sign of financial troubles.
Protections
On top of that, protection in case of bankruptcy is also critical. Even though IB is financially strong, we still want to know what would happen should it go bankrupt.
It is important to know that IB does not segregate each country. This means a Swiss investor using IB UK will use the same trading system as a US investor. This is great news for protection!
The SIPC will protect US Investors. SIPC protects your assets up to 500K USD. On the other hand, SIPC will only protect your cash up to 250K USD. And since Swiss investors are protected like US customers, we also get SIPC protection!
Now, there is an exception for some instruments. For instance, Contracts for Difference (CFDs) are prohibited in the United States. But they are offered to other investors. If you use them, the protection for your CFDs will fall to the FCA protection, up to 85K GBP.
Again, you have excellent protection against bankruptcy with Interactive Brokers. We have higher protection with IB than with a Swiss broker.
It is important to note that since Brexit, European investors have been using other entities of IB. In that case, the protection is worse since you will not get SIPC protection on stocks, only FCA. But Swiss investors still have SIPC protection.
If you want to learn more, I have an entire article about broker bankruptcy.
Technical security
Finally, technical security is also essential.
With Interactive Brokers, you will have strong technical security. All the communications with the server are encrypted. But all honest brokers are using encrypted traffic.
Most importantly, you can use Two-Factor Authentication for your account. For that, you will be able to use the IBKR Mobile Application. Every time you log in from the web interface, you must confirm the login and enter one more code on your phone. This second factor adds a great layer of security to your account.
So, Interactive Brokers has excellent security!
My Experience with IB
I started investing with Interactive Brokers when DEGIRO suddenly blocked access to US ETFs to Swiss Investors. Since then, I have been delighted with Interactive Brokers. I have been investing with IB for more than three years.
My entire stock portfolio is in my IB account. I buy new ETF shares every month from the default web interface. I have tried other interfaces as well. The IBKR Mobile application is very well done. But I generally prefer using my desktop computer rather than my phone.
I do everything from the Account Management interface. This interface suits all my needs. And IB fits my needs perfectly well. I have learned to ignore most of the tool’s features with time. I only need a few features for my trading.
Since I sometimes get paid in USD, I can wire them directly to my Interactive Brokers account. That way, I do not have to pay any currency exchange fees. And that way, I can directly invest the money.
Overall, I am happy with my experience with IB. I never had an issue with the broker. All my transfers reached IB very quickly. When I needed to withdraw money for the downpayment on our house, I had no problems. And all my trades have been flawlessly executed. The reporting on the web interface is also precisely what I need. I can only recommend IB!
IB Reputation
It is essential to look at a broker’s reputation before using it to invest in the stock market.
As a source of review, I always use TrustPilot. So, we look at the reviews of IB on TrustPilot. On average, users rate IB at 3.3 stars. Before looking at this, I was expecting a higher score.
First, we look at what people do not like about IB. We can categorize most of the negative reviews into two categories:
- Poor user interfaces. It takes a while to get used to the user interfaces of IB. But after some time, it is straightforward to use.
- Poor customer service. It seems that many people have issues getting help from customer service. I cannot comment on that since I have never used their customer service. But I know people in Switzerland that did and never had issues with them.
Overall, I am not too worried about these negative comments. A lot of them do not seem serious. And many commenters seem pissed off at making mistakes with the platform. But of course, it would be better if they are fewer negative reviews.
One good thing is that most reviews (39%) rate IB at five stars. So, we should also look at what positive reviews are saying:
- Excellent customer service. It is interesting to note that there are both negative and positive reviews of IB’s customer service.
- Excellent fee system
- Excellent order execution
- Good platforms
So, we can see that overall the reviews are mixed for IB. I think it comes from the fact that it takes a while to get used to it. Once you get used to it and focus only on the things you need, IB is quite simple to use.
Interactive Brokers Awards
One way to see how a broker is doing is to check out the awards they got from external sources. Over the years, Interactive Brokers has received many awards.
They received seven awards only in the year 2022:
- Best Online Brokers of 2022, by Barron’s
- Three awards from Investopedia, including best broker for international investing
- Several award titles from stockbrokers.com
- Several award titles from forexbrokers.com
- Several award titles from brokerchooser
While this is not the only thing that matters, awards are a good sign for Interactive Brokers.
Alternatives to Interactive Brokers
There are many alternatives out there.
The one that is the most interesting for a Swiss investor is DEGIRO. But we should also compare IB with a Swiss broker.
Interactive Brokers vs DEGIRO
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My top pick
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Good broker for Europe
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No custody fees
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Very affordable
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Pros:
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Pros:
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Cons:
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Cons:
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- Great prices
- Many investing instruments
- Excellent execution
- Access to US ETFs
- A little intimidating at first
- Affordable
- Wide range of investing instruments
- Expensive currency conversions
- No access to US ETFs
- Lend your shares by default
For European investors, DEGIRO is another interesting alternative. So, it is interesting to compare these two brokers.
The first main difference between the two brokers is that only Interactive Brokers offers access to US ETFs to Swiss investors. This difference makes IB a much better choice than DEGIRO for Swiss investors. It will make a significant difference in the performance of your portfolio. If you invest with DEGIRO, you must invest in inferior European funds.
But we can also look at the fees of both brokers. There are a few differences between DEGIRO and IB:
- IB is much cheaper for the American Stock Market
- DEGIRO is very slightly cheaper for the European Stock Market
- IB is much cheaper for Foreign Exchange (FOREX)
For the features part, there are a few differences as well. IB is also a FOREX broker, so you can hold many currencies in your account. And foreign currency exchanges are cheap. On the other hand, DEGIRO offers automatic currency exchanges when you buy and sell, but it is much more expensive than IB (unless you do small conversions).
You can also opt for manual currency conversions on DEGIRO, making currency conversions even more expensive. Overall, DEGIRO is not a great choice for trading currencies.
For the user interface, DEGIRO is slightly easier to use than IB. On the other hand, IB has many more features. But, likely, simple investors will not need many of these features.
Also, there is another difference in share lending. By default, DEGIRO will lend your shares to other investors. You, unfortunately, have no choice about that.
On the other hand, IB will not lend your shares by default. But with IB, you can choose to do that (it is called Stock Yield Enhancement Program), and then IB will give you some percentage of the profits. IB’s approach is much superior by not lending your shares by default.
Finally, IB was established in 1978, while DEGIRO only started offering brokerage accounts to retail investors in 2013. So, IB has more extensive experience.
So, overall, Interactive Brokers is a much better broker than DEGIRO. You will be able to access US ETF if you are Swiss. And you will be able to get excellent service at very low prices.
If you want more details, you can read my DEGIRO Review.
Interactive Brokers vs Swissquote
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Best broker overall
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Best Swiss Broker
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Extremely cheap
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Very affordable
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Pros:
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Pros:
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Cons:
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Cons:
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- Outstanding prices
- Many investing instruments
- Excellent execution
- Access to US ETFs
- Good reputation
- A little intimidating at first
- Swiss broker
- Easy to use
- Many investing instruments
- Access to US ETFs
- Good reputation
- Expensive to trade US shares
- Expensive currency conversion
Many Swiss investors prefer to use a Swiss broker. So, we should compare Interactive Brokers vs Swissquote, a great Swiss broker.
Both brokers offer access to US ETFs and have more or less the same set of features. If you are a simple passive investor like me, both brokers will have more than enough features for you.
You can trade with both brokers from your computer and your mobile phone or tablet. Swissquote is slightly easier to use than Interactive Brokers, but not by a long shot.
The main difference between these two brokers is price. If you use another stock exchange than the Swiss Stock Exchange, IB is much cheaper than Swissquote. In some cases, IB can be 100 times cheaper than SQ. This difference can be very significant.
On top of that, SQ has some custody fees, while IB has zero account management fees. So, if you are looking to optimize price, IB is the clear winner here.
For many investors, Swissquote will have the advantage of being in Switzerland. It may make it easier to deal with them if you have issues, while it could be complicated with IB. So, if you are looking for an affordable (not cheap) Swiss broker, Swissquote is an interesting alternative.
For more information, read my review of Swissquote or my comparison of Swissquote vs Interactive Brokers.
Frequently Asked Questions
What is the minimum deposit for Interactive Brokers?
There is no minimum deposit at Interactive Brokers. You can open an account without any money inside. Since there are no inactivity fees, this is perfectly fine for a small amount.
Is Interactive Brokers safe?
Yes. Interactive Brokers has been around for more than 40 years and has a great reputation. On top of that, it is well regulated in several different countries. Finally, your money is insured at Interactive Brokers for up to 500’000 USD, thanks to SIPC.
Is Interactive Brokers good for beginners?
Yes. While it is not the simplest broker out there, IB allows you to get started with little money and very low fees. The basic interface is simple enough to use and will allow you to do everything you need to start investing in the stock market.
What Interactive Brokers entity should I use?
As a Swiss investor, I recommend using the Interactive Brokers UK entity that offers the best regulations, protection, and features.
Interactive Brokers FAQ
Interactive Brokers is an excellent broker with everything you need to buy stocks and ETFs, reliably and at extremely affordable prices. With IB, you can trade U.S. stocks for as little as 0.5 USD!
Product Brand: Interactive Brokers
5
Interactive Brokers Pros
Let's summarize the main advantages of Interactive Brokers:
- A vast range of investments
- Very low fees
- No custody or inactivity fees
- Very professional service
- Offers US ETFs to Swiss Investors
- Good overall reputation
- Long experience
- Excellent security
Interactive Brokers Cons
Let's summarize the main disadvantages of Interactive Brokers:
- It can be intimidating at first
- Too many user interfaces
Conclusion
The broker you need to buy stocks and ETFs reliably and at extremely affordable prices. Trade U.S. stocks for as little as 0.5 USD!
- Extremely affordable
- Wide range of investing instruments
Overall, Interactive Brokers is an excellent broker. Their fees are incredible, and their service is top-notch. Interactive Brokers should be your choice if you want a professional broker at a very fair price.
Since they are still offering US ETFs to Swiss investors (why US ETFs are the best), Interactive Brokers is currently the best broker for Swiss investors. No other broker even comes close if you want to optimize your portfolio.
I have been using Interactive Brokers for more than two years now. IB is the broker I am currently recommending to Swiss investors. And it is also an excellent choice for European investors. I am pleased about IB and plan to continue using it for a long time.
Many people argue that we should not pay fees for brokers since there are free brokers. However, you have to be careful. There are many downsides to commission-free brokers. I much prefer paying very little for a great broker than not paying for a bad broker.
If you are interested in IB, I have a guide on opening an IB account.
What about you? What do you think of Interactive Brokers?
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Hello Baptiste,
Thank you for your article. I live in Switzerland and I am European. I was wondering if you have to pay taxes of your earnings (through your IB account) in US or only in Switzerland?
If you have to make a tax declaration in US, how does it works?
Thank you very much for your help
Hi Leticia,
We fortunately dont’ have to fill a US tax declaration. We are only eligible for taxes in Switzerland.
Thanks a lot for your quick reply.
Just to confirm, is this true if you purchase funds, ETFs, and also equities?
Thanks a lot!
At least for equities and ETFs, yes. For funds, I would assume so, but I have never held US funds other than ETFs.
Dear Baptiste,
thank you very much for all the information you share on your website. It’s been very useful and now I am myself an IB user.
I have a specific question on the withdrawal process. Since the direct debit system based on the ACH transfers is the only option without costs (and it’s only for US citizens), the other possibility for people residing in Switzerland come with some costs.
Option a)
withdrawing money by transferring funds to a Wise account (only possible in USD) and from there to the personal Swiss bank account
-> IB charges 1USD for every transfer (except the first one in each month) + Wise charges a variable exchange fee.
Option b)
withdrawing money via a bank wire. However, for UBS (my bank) the transfer will go through a correspondent UBS branch in the US before being routed to my personal account
-> IB charges 10USD for every transfer (except the first one in each month)+ unknown processing fees charged by UBS or its correspondent bank.
Which method do you follow when withdrawing funds from your IB account?
Do you know how much UBS charges in processing fees for their correspondent bank in the US?
Thank you very much for your help.
Paolo
Hi Paolo,
Are you trying to withdraw CHF?
I have withdrawn money several times from my account and never paid any fee. I have wired money to my Migros Bank and it did not charge any fee. Why does UBS route a CHF transfer to a US bank?
I would avoid Wise because you will pay a portion of the transfer, which is bad.
I have no idea about the details of UBS.
Hi Baptiste,
many thanks for your quick reply.
I realized the issue was related to the currency. I switched to CHF now and set up a wire transfer.
There was no warning about possible fees related to this method but I’m performing a small transfer to check this out.
Thank you again for your help.
Paolo
Awesome! Let us know if there are any fees, that would be interesting to know.
No fees :)
Thanks for sharing and good to know!
I tried to open Interactive Broker account. But its terrible process to open just the account itself.. Highest degree of personal questions even to extent of listing all your assets, properties, what you do, your company name etc a. Finally, tnd ask you to transfer money even before they approve the account. They ask for opening account “Proof of Liquid Net Worth. We kindly ask you to upload the supporting document to finalize the application process.”
Why they need Proof of liquid worth? Don’t they limit my exposure to the money I put in your account?
Also there response time and the way they communicate seems highly American burocracy. You never know how they use all this information and your rest of assets may become exposed just for few saving of commission.
Thanks for sharing your experience. I was not asked any proof of liquid net worth in my case. But I believe all these questions are dictated by regulations, not their own desire to have all this information.
An excerpt from the people over at schweizerfinanzblog.ch: “Einlagensicherung: Offenbar gibt es hier für CH-Kunden eine Änderung, wie uns auf unsere Anfrage am 28.3.2023 seitens des deutschsprachigen IBKR-Support mitgeteilt wurde. So sollen die Barmittel und Wertschriften von CH-Kunden im Konkursfall von IBKR neu durch die britische Organisation FSCS in der Höhe von 85’000 £ geschützt sein statt bisher durch die Securities Investor Protection Corporation (SIPC), welche eine maximale Deckungssumme von 500’000 USD anbot, davon 250’000 für Barmittel.”
This is contrary to what you are saying here. Do you know who is right?
This has already been covered in the comments below. Repeating here my previous comment:
Hello Baptiste,
Thank you for your article. I live in Switzerland and interested in IB account. Do you know if IB withhold any tax on interest earned from cash in the account?
Thanks!
Hi Matt,
No, I don’t think it does. You will have to declare the interest earned on cash on your tax declaration and you will pay the full amount there.