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Hidden Fees Your Broker Won't Tell You About |
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Commissions for discount brokers have never been lower than they are today.
Indeed, some discount brokers have dropped their commissions to zero. (See also: “Is a No-Commission Discount Broker for You?”)
But commissions aren’t the only fees you’ll pay to enjoy the services of a discount broker.
Like banks, most brokers also charge fees, which can range from annual maintenance fees to fees for paper statements and confirmations.
What’s more, it isn’t easy to ascertain what those fees are at most brokerage houses. You’ll have to read the fine print on the broker’s web site or account opening form.
Here are some of the more popular hidden fees to watch out for:
Inactivity Fees
It’s no secret that stockbrokers make money when you trade. Indeed, a criticism of many full-service brokers is that they push you to trade frequently to pump up commissions.
Now, discount brokers are trying to push customers to trade actively by charging inactivity fees to customers who don’t trade frequently enough.
WallStreet*e charges a $100 fee for inactive accounts. Interactive Brokers charges a monthly fee that can range from $3 to $10, and E*trade charges $40 a quarter. But you can get that fee waived if you keep enough money in your E*trade brokerage account or have other banking relationships with E*trade.
Buy-and-hold investors, or even those who trade a few times a month, need to look closely at these fees to see when they kick in. Or better yet: Find a broker that doesn’t penalize you for not trading.
Not sure if a full-service broker is right for you? Get help here.
Fees to Close Your IRA
Charging fees to close your IRA is one of the more popular ways to keep customers from switching discount brokers. Fidelity, Bank of America, WallStreet*e, Zecco, TradeKing and Wells Fargo all levy fees to close your IRA. Expect to pay between $30-$75 to transfer your IRA elsewhere.
How does your current discount broker stack up to your expectations? And when is it time to make a change? Get help deciding whether to switch online brokers here.
IRA Custodial Fees
Where some discount brokers charge you to close your IRA account, others…
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