Is a swap-free account really free?

Swap-free accounts exist to serve clients under Islamic law, who may neither receive nor pay
interest. Many brokers now open them to everyone, which raises a practical question: are you saving
money, or paying it somewhere else?

1. What it removes

Exactly what the name says: no swap charged for holding overnight. For anyone
trading gold or heavily negative-swap pairs in a
swing style, the saving is real and not small.

2. What replaces it

The broker still pays a financing cost on the
position to its liquidity provider. It recovers that in one of four ways:

• A wider spread — the most common, and the hardest to see, because no line on the
  statement names it.
• A fixed administration fee — an amount per lot per day, usually starting after the
  third to seventh day held.
• Excluded instruments — many brokers do not apply swap-free to gold, oil or exotic
  pairs, which are exactly the heaviest-swap instruments.
• A time limit — free for the first 5, 10 or 14 days, then normal swap or a
  substitute fee.

3. When it genuinely helps

• You hold for days to weeks on negative-swap instruments, and the administration
  fee is lower than the equivalent swap.
• You need to cost a trade in advance with certainty, without swap moving with
  interest rates.

4. When it is a step backwards

• You close within the day. You were not paying swap anyway, so the wider spread is
  pure added cost.
• You often go long USD/JPY or other
  positive-swap directions — moving to swap-free gives up money you were receiving.

5. How to check in ten minutes

1. Note the average spread on the standard account, on the instrument and at the hours you
   trade.
2. Do the same on the swap-free account.
3. Convert the spread difference to dollars per lot.
4. Compare against the average nightly swap × the number of nights you usually hold.

Whichever number is larger marks the more expensive choice — no guesswork needed.

6. One more question about rebates

Some brokers put swap-free accounts in a separate
IB commission band, so the rebate rate can
differ from the equivalent standard account. If you are collecting a rebate, check this
before converting, because it feeds straight into the
net cost calculation.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.