What is Unsettled Cash on ETrade?

What is Unsettled Cash on ETrade?

Online trading and investment have continued to grow over the years as platforms like ETrade have emerged. As an investor or an online business enthusiast, it is essential to understand certain terms used on investment platforms. Speaking of terms, you must have come across “unsettled cash” on ETrade.

Unsettled cash is the amount you earned through the sale of an investment. You cannot withdraw your unsettled cash until the settlement procedure is completed. Therefore, when you sell out an asset on ETrade, the money you receive from the sale requires a settlement period of 5 business days – Saturdays, Sundays, and weekends excluded – before it appears as available cash in your account.

In this article, we’ll take a look at the concept of unsettled cash on ETrade, what you can do with it, and when to use it. I will also shed more light on what happens during the settlement period.

When is an investment sale considered unsettled?

After selling an investment, say, stock, you will receive an amount from that trade. The amount received from the moment the transaction is complete until it shows as “cash available to withdraw” is known as unsettled cash or unsettled fund. Throughout this period, the investment sale is unsettled.

You can then withdraw the money earned into your bank account after settlement.

The unsettled cash concept is similar to, but not quite the same as the third-party Escrow. With Escrow, both parties do not receive their assets until the transaction is deemed successful. Also, Escrowed transactions take a shorter period, generally within 24 hours.

How long does it take for money to be available to withdraw on ETrade?

It takes three days to withdraw money after selling an investment since the Securities and Exchange Commission (SEC) has to clear the transaction. On ETrade, however, it takes longer – 5 days to release cash for withdrawal.

The SEC holds regulations on how long a stock transaction takes to become official. The present protocols require a three-day settlement for the cash from stock sales to be made accessible. So, you should expect at least three days from the moment you sell out stock to gain access to the money.

If you expect at least three days for settlement, then there is room for an extension of up to five days. ETrade transactions processes are slow, hence the 5-day settlement period.

When to use unsettled funds in a trading account on ETrade?

There are no limits on what you can purchase if your account has enough settled cash. In addition, whatever security you obtain using settled funds has no time constraints regulating when you can sell it. But there are restrictions with unsettled funds on ETrade.

You can use unsettled funds to buy more securities only if you do not sell the newly acquired security before the settlement of the original sale that generated the funds needed to finance the new purchase. If you sell the new security before the financing sale’s settlement date, it will be declared a Good Faith Violation.

You can purchase assets with unsettled funds as long as you allow them to settle before selling. The “Unsettled” is simply a heads-up that the money hasn’t been resolved yet.

Conclusion

For every investment you sell on ETrade, you receive unsettled cash. It takes a settlement period of 5 days to gain access to the money and withdraw it.

While you can use unsettled cash to buy stocks, it might lead to a breach of SEC regulations if you are not careful. Therefore, it is advisable to wait the five days required for the funds to be available to withdraw before making further transactions.  


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

Latest posts by Marvin Allen (see all)

Leave a Reply