How Does M1 Finance Make Money? (6 ways)

*This post may contain affiliate links, please see my disclosure

We’ve all heard the cliche about things being too good to be true. That’s probably why people often wonder “Is M1 Finance really free?” M1 Finance, one of the most popular investing platforms, is free. Really! It’s free to join; plus there are no commissions or management fees.

So how does M1 Finance make money? It’s a good question considering they support millions of users. M1 Finance found a mutually beneficial way to help customers grow their wealth while also generating income as an investment platform. Simply put, M1 Finance makes money through interest charges and upgraded subscriptions, among other strategies.

Let’s take a deeper dive into 6 ways M1 Finance makes money.

6 Ways M1 Finance Makes Money

M1 Finance uses some of the same strategies as traditional banks to generate revenue. Plus, some of the features that benefit M1 users the most also benefit them.

Read on to explore how:

Subscriptions (M1 Plus)

M1 Finance offers a suite of money tools and accounts for free. Once you set up an M1 Finance account, you will likely notice right away that M1 Finance offers something called M1 Plus.

M1 Plus is an elite tier of M1 Finance that offers a variety of additional benefits. Users can pay to unlock the best rates for M1 Borrow, get the M1 Spend Credit fee waived, and more.

The first year of M1 Plus is free. Beyond that, users pay $125 a year. That annual subscription for M1 Plus is one way that M1 Finance makes money.

Lending (M1 Borrow)

M1 Borrow is actually one of our favorite overlooked features of M1 Finance. Investors can use M1 Borrow to take out a portfolio line of credit. You can borrow against up to 35% of your investment account.

Investors might do this to buy on margin. They might also do this to cover unexpected large bills or to fund things like home renovations or vacations.

It turns out it’s not just a win for M1 Finance customers. M1 Borrow also helps M1 Finance make money. Because when you borrow money, you are charged interest based on your membership tier. M1 Finance is able to make money from those interest charges.

Currently, regular M1 Finance users pay 3.75% and M1 Plus users pay 2.25%.

Interest on Short Selling Borrowers

One investing strategy involves short selling. Short sellings has three parts:

  1. An investor borrows a stock
  2. That stock is sold on the market
  3. That investor hopes to buy that stock back later for less to return the stock to the lender

To complete a short sell, investors pay an interest charge when they borrow. That interest generates money for M1 Finance. Similarly, you also have to collateralize your loan by giving M1 Finance 102% of what you borrow in cash. M1 Finance is also able to generate money from that collateral.

This interest on short selling borrowers is yet another mutually beneficial way that M1 Finance generates money from its users.

Lending Your Cash (M1 Spend)

M1 Finance offers users the option of opening M1 Spend accounts. With an M1 Spend account, there is a checking feature. Customers enjoy the benefit of earning an AYP that is more than 30 times higher than the national average from big banks. You can also access your paycheck two days early thanks to early direct deposit.

M1 Spend accounts don’t just benefit you; they also benefit M1 Finance! These M1 Spend accounts generate income for M1 Finance the same way that your bank account makes money for a bank. Just like a bank can lend out your money to cover a loan, M1 Finance can also lend out your cash.

Worried that you’re not going to have cash when you need it? Don’t sweat it! M1 Finance primarily lends to banks on an overnight basis. The ability to lend your cash is another revenue stream for M1 Finance.

Payment for Order Flow

M1 Finance is responsible for a lot of trades. With over six billion dollars in assets under management, you can see why. As a part of this, M1 Finance can receive a small commission for how and where they direct the order to complete the trade. In short, any time you buy or sell a security, the structure M1 Finance uses charges a spread.

While the process might sound a bit complicated, it happens seamlessly. Plus, M1 Finance makes sure that the rates are competitive. After all, they want to make money, but they know they need to set up their platform and their trades in a way that benefits their users.

M1 Finance says that these spread charges result in averages of about $0.002 per share. It’s not noticeable to users. But when you consider the volume of trades M1 Finance oversees, it makes sense how payment for order flow can also make M1 Finance money.

Interchange Fees

M1 Spend accounts also grant users access to an M1 Visa Debit card. You can link this to your checking account to streamline the banking process.

When you do so, M1 Finance has another way to make money. Interchange fees are part of debit card transactions. These fees cover everything from fraud to handling costs. Basically, it’s a small fee to cover what makes using a debit card so quick and convenient. M1 Finance gets a small slice of the small fee.

Check out our full M1 Finance review to learn more about how the platform can help you grow your wealth and hit your money goals.

Other Investing Apps To Consider

We are confident that M1 Finance makes money in a way that benefits both the user and the platform. Their millions of customers attest to that. However, M1 Finance isn’t the only investing platform that people are raving about. In fact, we founded up our favorite investing apps for 2022.

Let’s explore three apps from the list that are fan favorites!


Wealthfront relies on time-tested ETF investing strategies to help investors reach the money milestones that matter to them. Like many other online brokers and investing platforms, Wealthfront shines with its low fee structure and competitive management costs. It’s truly designed to keep more money in your pocket–or your portfolio!

Investors who want to take a more active approach to investing, though, might be better suited with another platform like M1 Finance. That’s because Wealthfront doesn’t currently offer any fractional shares or individual stocks. You also can’t tap into their lowest fees until your portfolio crests $100,000. That’s a considerable amount of time to wait with other platforms offering more competitive rates right away.

See our full Wealthfront Review here to see if this “set it and forget it” approach to building wealth is right for you.


Public is an innovative app that is great for all kinds of investors. New investors will appreciate the fact that Public worked hard to remove the most common barriers at the beginning of an investing journey. That means there are low fees, no minimums, and fractional shares start at just one dollar.

In addition to stocks and ETFs, users can also invest in crypto with Public.

If you’re wanting to learn more about investing, you’re going to love the community aspect of Public. Investors can share their portfolios, allowing you to see different strategies in real time. Plus, Public hosts a variety of live events users can attend virtually. They’re full of discussions and investing resources.

Check out our full Public review here and learn more about the social side of this newer investing platform!

SoFi Invest

The name SoFi Invest might be familiar to you if you have a SoFi account for a loan or for a checking or savings account. This platform is a solid option, especially for users who want to streamline their money management. Keeping all of your accounts under the SoFi name can simplify your finances.

SoFi Invest offers a variety of low-fee fund choices. They also don’t charge any minimums or management fees. Like M1 Finance, SoFi Invest also offers users the ability to buy fractional shares. That means you can put your money to work much sooner.

They are a bit limited when it comes to their different fund options, and SoFi Invest does not currently support tax loss harvesting. Still, they’ve quickly grown their platform, thanks, in part, to SoFi account holders looking for a sleek experience with a brand they already trust.

See our full SoFi Invest review here.

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

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