What Is a Cash Account?

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A cash account is a stock or bond trading account that requires cash payments and cash payouts for buying and selling. Understand the terms of a cash trading account with help from a financial consultant in this free video on money management and personal finance.

Part of the Video Series: Money Management & Personal Finance
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Video Transcript

Have you ever opened up a stock or bond trading account? Do you remember when you were signing up and filling out the application they asked you your name and address and phone number and then there were boxes that you could choose. One was for cash account and one was for margin account. The question today is what is a cash account? Well pretty simply it's where you're obligated to pay in cash entirely for anything you buy there. On the other hand, they are obligated to pay to you in cash entirely anything that you sell there. It's pretty simple. Whether that bank or brokerage firm requires you to put that cash up ahead of time really depends upon the bank. Others will let you pay a day or two or three days later depending upon the type of investment that you've made. Conversely, if you were to sell something and you're getting money out, whether that bank will enable you to take that money out that day or two or three days or even in some cases a week later really depends upon the type of asset that you've sold and what the laws here are in the United States. The rules differ though in different countries so you have to be very cognizant of that. In Hong Kong the rules are different, in Britain, in France, in Switzerland and here. The dates and rules are going to be different. But generally cash account means pay for it in cash. I'm Roger Groh at Groh Asset and thank you very much for spending time with me.


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