Swap-Free Accounts Explained: How They Work, Downsides and Who They Suit
Are you unsure what a swap-free account is, or how it differs from a regular account?
In short, swap is not applied, but other costs may be charged instead.
This article covers how it works, the forms it comes in, substitute costs, who it suits and what to check before applying.
Key takeaways
- A swap-free account applies no swap on overnight holds and is also called an Islamic account.
- Admin fees, wider spreads or limits on eligible symbols may apply instead, so check the total cost.
- The form offered and application conditions differ by broker, so check the official page before applying.
In short: a swap-free account is one to choose after checking the conditions
- A swap-free account is an account where no swap is applied at rollover
- As a guide, it comes in three forms: by application, standard on all accounts, or free for a limited number of days
- Admin fees or wider spreads may be charged instead
- Application conditions and fees differ by broker, so check the official page
A quick refresher on how swap points work
Swap points are an adjustment amount that arises from the interest rate difference between two currencies. When you hold a position overnight, a payment or receipt occurs at the daily cutoff time.
- Buying a currency with a higher interest rate tends to result in a receipt
- Buying a currency with a lower interest rate tends to result in a payment
- Buying and selling reverse the receipt and the payment
- If you close the position within the same day, no swap occurs
Details of the calculation are covered in a related column.
What is a swap-free (Islamic) account?
A swap-free account is an account where no swap is applied when you hold positions overnight. The alternative name, Islamic account, comes from its design to respect the principle of avoiding the paying and receiving of interest.
Today, some brokers offer it in a form anyone can choose, regardless of faith. The conditions for using it differ by broker.
| Form offered | What it means | What to check |
|---|---|---|
| By application | You apply for religious or other reasons and can use it once approved | The application conditions and whether documents are required |
| Standard on all accounts | No application needed; no swap is applied as part of the account specifications | The level of substitute fees and spreads |
| Free for limited days | Swap is free up to a set number of days, and fees apply after that | The number of free days and how fees are calculated beyond that |
Costs that may be charged instead of swap
Since swap is removed, a broker may adjust costs in another form. Even if negative swap disappears, your total cost does not necessarily go down.
| Substitute cost | What it means | Easily overlooked |
|---|---|---|
| Admin fee | A fee charged according to the number of days held and the lot size | It can be higher than the swap |
| Wider spreads | Spreads are set wider than on a regular account | The impact is larger for people who trade short term often |
| Restrictions on symbols | It cannot be used for some currency pairs or symbols | A symbol you want to trade may not be covered |
Who a swap-free account suits and who it does not
Suitability depends on how long you hold and the swap direction of the symbols you carry overnight. Start by sorting out your own trading style.
| Category | Example | Reason |
|---|---|---|
| Suits | Swing traders who hold symbols with negative swap for several days to several weeks | You may be able to avoid overnight payments |
| Suits | People with a conviction against paying or receiving interest | It is designed as a system that respects that principle |
| Does not suit | People who want to receive positive swap | The chance to receive it disappears |
| Does not suit | People who mainly trade short term and rarely hold overnight | The swap benefit is small, and wider spreads tend to weigh more |
If unsure, count how often you hold overnight
Check the days and symbols you held overnight in past trades. Comparing your total swap with the expected fees makes the decision easier.
What to check on the official page before applying
Conditions differ by broker and can change. Before you apply, it is safer to check the official page in the following order.
- 1
Check the form offered
Find out whether it is by application, standard on all accounts or for limited days.
- 2
Check the substitute costs
Look at whether an admin fee exists, how it is calculated and the level of spreads.
- 3
Check eligible accounts and symbols
Find out whether the symbols you want to trade are covered by the swap-free setup.
- 4
Check application conditions and screening
Confirm the required documents, the approval process and whether you can switch later.
How swap-free accounts relate to cashback
Many cashback schemes are calculated based on trading volume, which is separate from whether swap applies. However, some account types may be excluded.
Whether an account is eligible will be published on each broker page at launch. Cashback amounts are not yet confirmed. Avoid choosing an account type because of the rebate.
Enter the lot size and number of days to estimate the swap on holding overnight. Compare it with the expected fees.
Calculate swapFAQ
Q.What is a swap-free account?
It is an account where no swap is applied even if you hold positions overnight. It is also called an Islamic account. Admin fees and the like may be charged instead, so check the conditions on the official page.
Q.What are the disadvantages of a swap-free account?
You cannot receive positive swap, admin fees or wider spreads may be charged, and eligible symbols may be limited. Conditions differ by broker.
Q.Can I use a swap-free account regardless of religion?
It depends on the broker. Some require a religious reason to apply, while others let anyone choose it. Check the application conditions on the official page or with support.
Q.Can I receive cashback on a swap-free account?
Some account types may be excluded. Whether an account is eligible will be published on each broker page at launch. Cashback amounts are not yet confirmed, so check the official announcements.
This article is for information purposes only and is not investment advice. Conditions may change, so please check each broker's official page for the latest information. Offshore FX and CFD trading carries a risk of losses exceeding your principal.
