MAKING THE SWITCH
Cash, Margin, and Registered Accounts: What's the Difference?
Your account type is the container your investments live in. Here are the three you will meet most often
When you open a self-directed brokerage account, you will usually be asked to pick an account type before you are asked almost anything else.
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It can feel like a strange place to start, since you may only want to buy an index fund. Still, the account type matters. Think of it as the container your investments live in, because it quietly shapes what you can do and how you are taxed.
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Here is a plain-language look at the three containers you will run into most often.
Cash Accounts
A cash account is the simplest option, and it is the default for most people. You can only invest with money you have actually deposited, so there is no borrowing and no leverage. Leverage simply means investing with borrowed money.
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When you sell an investment, the cash from that sale needs a short time to settle. Once it has settled, you can reinvest it or withdraw it.
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Because no borrowed money is involved, a cash account carries no risk of owing the brokerage more than you put in. This is why it is the account type most often paired with a long-term, buy-and-hold approach. Money goes in, investments are held, and no debt is attached.
Margin Accounts
A margin account lets you borrow money from the brokerage, using the investments you already hold as collateral. Collateral is what the lender can claim if you cannot repay the loan.
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The borrowed money can buy more securities than your cash balance alone would allow. This is why margin is often called leverage. It can amplify your gains, but it amplifies your losses in exactly the same way, and you owe the borrowed amount no matter how your investments perform.
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Both Canada and the U.S. limit how much you can borrow, and both require the account to keep a minimum cushion of your own money. This cushion is called the maintenance margin.
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If the value of your account drops too far, the brokerage can issue a margin call, which is a demand for more cash or securities. The brokerage can also sell your holdings without asking you first.
In Canada, margin rules are set by CIRO, the Canadian Investment Regulatory Organization, and the amount you can borrow varies by the type of security you hold.
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In the U.S., FINRA sets the margin rules. Until recently, accounts that made frequent short-term trades on margin could be flagged as “pattern day traders,” which came with a $25,000 minimum balance. In 2026, U.S. regulators replaced that rule with new intraday margin rules, which check your account balance throughout the trading day. Brokers are still phasing these in.
WHY IT'S EASY TO MISS
Most brokerages make margin an easy checkbox when you open an account. It takes one click to turn on, but the added risk is far larger than that click suggests.
Margin is not inherently reckless. Plenty of investors never touch it, and some experienced investors use small amounts of it on purpose. Still, it carries a meaningfully different risk profile than a cash account, so it is worth understanding fully before you opt in.
Registered and Tax-Advantaged Accounts
This is the category where Canada and the U.S. truly part ways. Both countries offer accounts with special tax treatment to encourage saving for retirement, education, or other goals. The specific accounts, their names, and their rules are different enough that it helps to look at them side by side.
The shared theme, even with different names and rules, is that governments on both sides of the border use these accounts to nudge long-term saving. Some give you the tax break today, while others give it to you later.
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Which account, or combination of accounts, fits a given goal depends on the country. Each one has enough detail that it gets its own dedicated page instead of being crammed in here.
Where to Go From Here
This page is the general map. The mechanics of each registered account, including contribution limits, withdrawal rules, and what happens if you over-contribute, live on their own country-specific pages. Those pages also take a closer look at how cash and margin accounts are opened and funded in Canada versus the U.S.