Types of Fees in Online Brokerages

Types of Fees in Online Brokerages

Besides trading fees, online brokerages often charge fees for different types of services. Base-trade fees or fees-per-trade are generally the most common ones, but there are other types of costs that investors aren't aware of. These other charges are rarely posted on the landing page of online brokerages and are often listed under “other” or “miscellaneous” fees. While these fees may not always be assessed, knowing what they are and what you might be charged allows investors to minimize potential costs associated with investing in stock trading through online brokerages. Here are the different types of fees you can encounter when trading online.

Trading Fee

When you trade a financial product, you are charged a commission, which is a fee charged by the broker for executing the trade. This fee is often called a base-trade fee, or fee-per-trade. Trading fees vary widely by firm, with an approximateaverage fee to trade stocks / ETFs of $8.90. Tradeking and Optionshouse offer the cheapest fee-per-trade at $4.95, while T. Rowe Price charges one of the highest fees at $19.95 per trade for stocks and ETFs. Some online brokerages like e*Trade offer volume discounts where investors are offered a lower base-trade fee if you trade a lot. Tradestation, another discount online brokerage, also offers a fee-per-share model as an alternative of the fee-per-trade model. The cost to purchase mutual funds through your online broker is another fee altogether.

Account Maintenance Fee

The account maintenance fee is usually charged annually and can range from $20 to $50. Some brokerages, like WellsTrade, charge a maintenance fee if the account value dips below a certain threshold. Usually, this fee is triggered when an account’s value drops below a certain threshold or an account has been dormant (i.e. zero executed trades) for a certain period of time.

Account Transfer Fees

If you decide to transfer an account from one brokerage to another, you should pay attention to account transfer fees. To transfer an account, brokerages use the Automated Customer Account Transfer Service (ACATS); usually, the original brokerage charges the investor a fee for this service. From our study, the average cost to transfer a brokerage account to another brokerage is $65.00. For the year 2015, many brokerages offer a waiver or reimbursement of ACAT fees. For example, TradeKing offers a reimbursement of account transfer fees up to $150.

Wire Transfer Fees

All of the online brokerages we surveyed do not charge for electronic transfers of funds to and from an investor’s account. However, all online brokerages, like banks, charge steep fees for wire transfers. The average cost for a wire transfer with online brokerages is approximately $25 which is on par with what banks charge; T. Rowe Price charges the lowest wire transfer fee at $15, while TradeKing, FirstTrade and WellsTrade charges $30.

Checking Account Service Fees

Some of the brokerages we surveyed, including SogoTrade and Tradestation, do not offer checking account services. Those that do offer checking services connected directly to your brokerage account, like Optionshouse, tend to require high account values and charge service fees - at Optionshouse the fee runs as high as $75 per year. Brokerages with banking arms like e*Trade, Merrill Edge and Sharebuilder do offer checking and savings accounts, but this service is not connected directly to your brokerage account.

Paper Statement Fees

If you’re uncomfortable with online-only account statements, pay attention to the fees you may be charged for traditional paper statements. 10 out of the 15 online brokerages we looked at in our study charge a nominal fee for paper statements. On average, the fee charged is approximately $2 per statement. If you are getting paper statements monthly, that is $24 a year, almost 5% of an account with a value of $500. Some brokerages like Sharebuilder, Merrill Edge, FirstTrade and SogoTrade charge even higher fees at $5 to discourage investors from requesting paper statements.

Account Closing Fees

As incredible as it sounds, some brokerages charge you a fee to close your account. This is not common, however; only two out of the 15 brokerages we surveyed charged a fee to close a brokerage account. T. Rowe Price assesses a $50 fee to close an account while e*Trade charges $10 if an account is closed within 120 days of opening. Since you have many other options available to you, we suggest avoiding brokerages that assess fees for closing accounts.

Ting is a ValuePenguin Co-Founder. She previously evaluated corporate mergers and acquisitions as a Financial Analyst at Citigroup.