Understanding Stock Broker Fees and Commissions

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Stock broker fees can be a significant expense for investors. In the article, we learned that some brokerages charge a flat fee per trade, while others charge a percentage of the trade value.

Many brokerages also have account maintenance fees, which can range from $5 to $20 per month. These fees are typically waived if you maintain a minimum balance or meet certain trading requirements.

Some brokerages offer commission-free trading for certain types of accounts or for a limited number of trades per month. However, these promotions often come with restrictions, such as requiring you to fund your account with a minimum amount of money.

It's essential to understand the fees associated with your brokerage to avoid unexpected expenses and make informed investment decisions.

Consider reading: Currency Carry Trade Etf

Brokerage Accounts

Brokerage accounts are essentially bank accounts with more freedom. Once you've deposited money into a brokerage account, you can use that money to purchase investments like individual stocks, mutual funds, and exchange-traded funds.

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Traditional brokerage accounts are called taxable accounts because the investment income may be taxable each year. This means you'll need to report any gains or losses from your investments on your tax return.

You can minimize account fees by choosing a broker that doesn't charge them, or by opting out of services that cost extra. Some brokers even offer to reimburse your transfer fees if you're moving to another brokerage firm.

Most brokers charge a fee for transferring out investments or closing your account entirely. However, some brokers may offer to reimburse your transfer fees, at least up to a limit.

Here are some popular brokerage accounts for online stock trading:

  • Webull
  • Charles Schwab
  • Interactive Brokers IBKR Lite
  • J.P. Morgan Self-Directed Investing
  • Public
  • Robinhood
  • SoFi Active Investing
  • Fidelity
  • Firstrade
  • Merrill Edge Self-Directed
  • Moomoo
  • tastytrade

Brokerage Fees

Brokerage fees can be a significant expense when trading stocks online. Most brokers will charge a fee for transferring out investments or closing your account entirely, but some may reimburse your transfer fees up to a limit.

You can minimize other fees by choosing a broker that doesn't charge them or by opting out of services that cost extra. Common fees to watch out for include annual fees, inactivity fees, trading platform subscriptions, and extra charges for research or data.

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Some brokers, like Webull and Charles Schwab, don't charge annual fees, inactivity fees, or trading platform subscriptions. Others, like J.P. Morgan Self-Directed Investing, charge a fee for options trades, which is $0.65 per contract.

Here's a breakdown of some common brokerage fees:

Keep in mind that some brokers may charge other fees, such as fund expense ratios, which can range from 0.0% to 0.5% of your investment.

Compare

Compare brokerage fees can be a daunting task, but it's essential to understand the costs involved. Some brokers charge annual fees, while others have inactivity fees, trading platform subscriptions, and extra charges for research or data. Most other fees can be sidestepped by choosing a broker that doesn't charge them or opting out of services that cost extra.

You may not be able to avoid account fees completely, but you can minimize them. Some brokers will charge a fee for transferring out investments or closing your account entirely. However, you can avoid these fees by choosing a broker that doesn't charge them or by opting out of services that cost extra.

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To minimize fees, consider choosing a broker that doesn't charge annual fees, inactivity fees, or trading platform subscriptions. Some brokers also offer free stock and ETF trades, making them a great option for beginners or those who trade frequently. If you're looking for a low-cost options broker, consider Public, which pays options traders a rebate that ranges from $0.06 to $0.18 per contract.

Here's a comparison of some popular brokers' fees:

Keep in mind that while some brokers may offer free trades, they may make money in other ways, such as through interest income from margin loans or robo-advisory service fees. Always review the fee schedule before placing trades in your account.

Some brokers also charge a Consolidated Audit Trail (CAT) fee, which starts on or after March 3, 2025. This fee ranges from $0.0035 per contract for options to $0.000046 per share for National Market System (NMS) equities. The CAT fee will be rounded down to $0 if it's less than $0.01 or rounded to the nearest penny if it's more than $0.01.

Asset management fees, also known as robo-advisor fees, can vary depending on the flexibility of the service and your access to human advisors. Some robo-advisors charge a low fee relative to human investment advisors, while others remain free or charge a low fee relative to the level of service they provide.

Curious to learn more? Check out: 401k Robo Advisor

Exchange Fees

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The Options Clearing Corporation (OCC) collects an Options Regulatory fee (ORF) that the U.S. options exchanges assess their members in connection with options transactions.

These fees are industry standard and are used to recover a portion of the costs related to the OCC's supervision and regulation of the options markets.

The OCC also charges a clearing fee for their central counterparty clearing and settlement services to 16 exchanges.

Robinhood will collect a combined $0.04 fee for each options contract traded to cover their costs for these fees, starting January 10, 2025.

This fee is calculated based on an average of what Robinhood typically remits to the exchanges, and may differ from or exceed the actual fee they paid in connection with any transaction.

ADR Fee

American depositary receipts (ADRs) can be a convenient way to invest in foreign stocks, but be aware that banks issuing these certificates may charge custodial fees. These fees typically range from $0.01 to $0.03 per share.

If you're planning to buy or sell ADRs, factor in these costs to avoid any surprises.

Curious to learn more? Check out: Moomoo Fees

Investment Options

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Fidelity Investments offers access to a wide range of research from 20 third-party data suppliers, including Thomson Reuters and Recognia.

Most brokerages on this list offer access to U.S.-listed stocks and ETFs, but your choice of platform can make a big difference if you're looking for alternative investments.

If you're interested in investing in forex and cryptocurrencies, your options will be limited, but Robinhood is a good choice for crypto investors.

Fidelity Investments stands out for its selection of over 3,500 commission-free mutual funds, making it a great option for those looking to diversify their portfolio.

Some brokerages, like Fidelity, offer 24/7 live phone, chat, and email support, which can be a big plus for investors who need help outside of regular business hours.

You can open an account with Fidelity Investments without a minimum deposit, making it a great option for those just starting out.

Here's a quick rundown of some key features to consider:

  • Fidelity Investments offers access to 20 third-party data suppliers, including Thomson Reuters and Recognia
  • Most brokerages offer access to U.S.-listed stocks and ETFs
  • Robinhood is a good choice for crypto investors
  • Fidelity Investments offers over 3,500 commission-free mutual funds
  • Fidelity Investments offers 24/7 live phone, chat, and email support
  • No minimum deposit is required to open an account with Fidelity Investments

Uninvested Cash Interest Rate

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Uninvested cash can start to accrue in your brokerage account from activities like dividend payments. Brokerage accounts are increasingly competing in this area, with some paying 4% or more.

Not all brokerage firms publish their uninvested cash interest rate, often burying it in the details. They tend to hide it if the offered rate is low or 0%.

The Federal Reserve has started to cut interest rates, but overall rates remain high. It still pays to consider what rate your brokerage firm pays on uninvested cash.

Some brokerage firms pay interest on uninvested cash, but many don't pay at all. We've compiled a list of the best brokerage interest rates, updated monthly.

Here's an interesting read: Us Treasury Bond Coupon Rate

Brokerage Options

Brokerage options can be overwhelming, but let's break it down. Robinhood, for example, offers commission-free trades for stocks and ETFs, but charges $0.35 per contract for index options trading with a Gold subscription, and $0.50 without one.

Some online brokers, like Webull and Charles Schwab, offer commission-free trades for stocks and ETFs. Interactive Brokers and J.P. Morgan Self-Directed Investing also offer commission-free trades for stocks and ETFs, but charge $0.65 per contract for options trades.

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If you're looking for a brokerage that caters to sophisticated traders, TradeStation is a great option. It offers commission-free trades for stocks and ETFs, as well as advanced trading tools and features.

Choosing a Broker

Choosing a broker can be overwhelming, especially for beginners. To make an informed decision, consider the following key factors.

First, think about your investing goals and priorities. Are you a beginner looking to learn how to buy and sell stocks, or a sophisticated DIY trader? Different brokerages cater to different needs.

If you're a beginner, look for a broker with a user-friendly platform and educational resources. Robinhood, for example, is known for its easy-to-use app-based platform and streamlined mobile experience. Its mobile app is designed to focus the user on placing trades, making it a great choice for beginners.

Consider the fees associated with trading. While many brokers offer commission-free trades, some may charge fees for certain services, such as options trading or advisory fees. For example, J.P. Morgan Self-Directed Investing charges $0.65 per contract for options trades, while Interactive Brokers charges $0.65 per contract as well.

Here's a comparison of some popular brokers' fees:

Ultimately, the best broker for you will depend on your individual needs and preferences. Be sure to research and compare different brokerages before making a decision.

Full-Service Broker vs. Broker

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A full-service broker is not an option for most investors, as they can charge substantial fees and transaction costs that can erode long-term investment gains.

None of the brokers on our list are full-service brokers, they are all discount online brokerage firms.

You can pay a lot for personalized service and advice, but it's not necessary for most investors.

Full-service brokers often offer a wide array of services and products, including investing and tax advice and regular portfolio updates.

If you have more money than time, a full-service broker may be for you, but for most, it's better to open a brokerage account at an online broker.

These online brokers allow you to buy stocks yourself through their websites or trading platforms, often with no fee or commission.

Curious to learn more? Check out: Buying Stock without Broker

For Sophisticated Traders

If you're a sophisticated trader, you're likely looking for a brokerage that can keep up with your demanding needs. TradeStation is a top choice, offering commission-free stock and ETF trades on its mobile and Web apps, and totally free for TS Select members on its powerful desktop platform.

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For those who want to take their trading to the next level, TradeStation's advanced features are a game-changer. Its FuturesPlus interface offers no platform fees, making it ideal for institutional-grade futures trading.

A key benefit of TradeStation is its beginner-friendly approach, thanks to YouCanTrade, a sister company that provides multimedia training tools and educational modules for traders of all levels.

If you're interested in crypto trading, TradeStation's TSCrypto platform is a great option, offering one-click order entry, advanced order routing, and interest on eligible crypto holdings.

Some of the key features of TradeStation include:

  • FuturesPlus, an institutional-grade futures interface with no platform fees
  • TSCrypto, a crypto trading platform with one-click order entry, advanced order routing, and interest on eligible crypto holdings
  • A simulated trading module that lets you test different trading strategies without risking your own funds

Overall, TradeStation is a top choice for sophisticated traders who demand the best tools and resources to succeed in the market.

How to Switch

Switching to a new online broker is a relatively quick and easy process that can be handled online. You'll need to find your most recent brokerage account statement.

To initiate the transfer, you'll need to open an account at the new broker, providing details like your address, income, birthday, and Social Security number. This can be done online.

For your interest: What Is an Online Broker

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The transfer process typically involves filling out a form online that initiates an Automated Customer Account Transfer (ACAT). You'll need your brokerage account statement to supply information like your old account number. This will help your new broker confirm that your investments can be transferred in-kind.

It's worth noting that some investments may not be transferable in-kind, and you'll need to sell them and transfer the cash instead. Your new broker will let you know if this is the case.

The entire process can take up to seven days to complete. Your brokerage firm will provide a more specific timeline, and you'll be notified once the transfer is complete.

Here's a quick three-step process to transfer your investments to a new online broker:

  1. Find your most recent brokerage account statement, then open an account at the new broker.
  2. Initiate the transfer process through the new broker by filling out an ACAT form online.
  3. Wait for the transfer to be completed, which can take up to seven days.

It's essential to ensure that your new account matches your old account, including the type of account (e.g., taxable or retirement account).

Investment Options

Fidelity Investments offers access to U.S.-listed stocks and more than 3,500 commission-free mutual funds. You can also access research from 20 third-party data suppliers, including Thomson Reuters and Recognia.

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Most brokerages on this list provide access to U.S.-listed ETFs, but if you're looking for alternative investments like forex and cryptocurrencies, your choices will be limited. Robinhood is a notable exception, offering easy access to cryptocurrencies.

You can expect 24/7 live phone, chat, and email support from Fidelity Investments, making it a reliable choice for investors.

Brokerage Services

Brokerage Services offer a lot of freedom with your money. You can use the funds in a brokerage account to purchase investments like individual stocks, mutual funds, and exchange-traded funds.

Brokerage accounts are similar to bank accounts, but with more flexibility. They're also known as taxable accounts, because the investment income in your account may be taxable each year.

To choose the best online broker for you, consider factors like those used by our team when evaluating brokerage accounts. These factors are key to finding the right fit.

A brokerage account is a great way to start investing in the stock market. You can deposit money into the account and use it to buy investments that aren't available in a typical bank account.

Here are some popular brokerage accounts for online stock trading:

  • Webull
  • Charles Schwab
  • Interactive Brokers IBKR Lite
  • J.P. Morgan Self-Directed Investing
  • Public
  • Robinhood
  • SoFi Active Investing
  • Fidelity
  • Firstrade
  • Merrill Edge Self-Directed
  • Moomoo
  • tastytrade

Brokerage Companies

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Some of the top brokerage companies for online stock trading include Webull, Charles Schwab, and Interactive Brokers IBKR Lite.

These companies offer a range of services and features that can help you get started with trading. For example, Webull offers commission-free trading and a mobile app that allows you to trade on the go.

Here are some of the top brokerage companies mentioned in NerdWallet's list:

  • Webull
  • Charles Schwab
  • Interactive Brokers IBKR Lite
  • J.P. Morgan Self-Directed Investing
  • Public
  • Robinhood
  • SoFi Active Investing
  • Fidelity
  • Firstrade
  • Merrill Edge Self-Directed
  • Moomoo
  • tastytrade

Fidelity

Fidelity is a great option for those looking for a well-established brokerage with top-notch research tools and customer service. Fidelity stands out for its strong customer support, available 24/7 via phone, chat, and email.

Fidelity offers a wide selection of in-house index funds with no expense ratio, making it a great choice for those looking for no-cost investment funds.

One of the key benefits of Fidelity is its low-cost stock and ETF trades, with no fees. Options trades are also available for $0.65 per contract.

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Fidelity's trading platform is accessible on mobile, web, and an active trader platform, making it easy to trade on-the-go. The broker-assisted trade fee at Fidelity is higher than most competitors charge, but it only comes into play if you need help placing a trade.

Here are some key features of Fidelity:

  • Stock/ETF trades: $0.
  • Options trades: $0.65 per contract.
  • Stock trading platform: Mobile, web and an active trader platform.

Fidelity is also a great choice for those looking to invest in Bitcoin and Ethereum, as it offers access to these cryptocurrencies.

Charles Schwab

Charles Schwab is a top-notch brokerage company that's hard to beat. It offers commission-free stock trades with a $0 fee, making it a great option for investors.

Charles Schwab has four free trading platforms and three high-quality mobile apps to choose from, which is more than many investors need. This means you can pick the one that suits your trading style best.

One of the standout features of Charles Schwab is its 24/7 customer support, which is perfect for investors who need help outside of regular business hours. This level of support is a big plus in my book.

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Here are some of the key benefits of using Charles Schwab:

  • Commission-free stock trades: $0
  • Options trades: $0.65 per contract
  • Four free trading platforms and three mobile apps

Charles Schwab has a reputation for being a reliable and trustworthy brokerage company, and for good reason. It offers a wide range of account types, including taxable brokerage accounts and traditional IRAs, Roth IRAs, health savings accounts (HSAs), education savings accounts, and more.

One thing to keep in mind is that Charles Schwab's low interest rate on uninvested cash in your portfolio is one of the broker's only drawbacks.

See what others are reading: Offshore Brokerage Accounts

Robinhood

Robinhood is a great option for beginners who want to start trading stocks. It's the easiest to use, with a streamlined mobile app that focuses on placing trades.

Robinhood offers direct access to cryptocurrencies, fractional share investing, and a premium membership (Robinhood Gold) that provides margin investing, Level II Nasdaq data, and professional research from Morningstar.

One of the best features of Robinhood is that it's free to trade stocks and ETFs, with no commissions or fees. However, it's worth noting that Robinhood's customer support has long been a weak point, but it has improved over the years.

Discover more: App like Robinhood

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Here are some key benefits of using Robinhood:

  • Direct access to cryptocurrencies
  • Fractional share investing
  • Premium membership with margin investing, Level II Nasdaq data, and professional research
  • Free to trade stocks and ETFs
  • Mobile app is streamlined and easy to use

Overall, Robinhood is a great choice for beginners who want to start trading stocks, and its free features make it a great option for those on a budget.

Frequently Asked Questions

Is it worth it to pay a Stock Broker?

Paying a stock broker may be worth it for those seeking personalized guidance, but for self-directed investors, lower-cost options are available

How much money do I need to get a Stock Broker?

You can start investing with as little as $5, but some brokerages may have different minimums for margin accounts. Find out which brokerages offer low or no minimums to get started with your investment journey.

Joan Corwin

Lead Writer

Joan Corwin is a seasoned writer with a passion for covering the intricacies of finance and entrepreneurship. With a keen eye for detail and a knack for storytelling, she has established herself as a trusted voice in the world of business journalism. Her articles have been featured in various publications, providing insightful analysis on topics such as angel investing, equity securities, and corporate finance.

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