Could a new era of free stock trades be arriving at discount brokerages across the land?
Bank of America
The offer applies immediately in the Northeast and will spread to the rest of the country by early next year. The Wall Street Journal, and other newspapers, said the move could touch off a price war and force other discount brokers to meet the offer by cutting or eliminating their fees.
So far, other discount brokers, such as TD Ameritrade
High trading fees aren't to be ignored. They can chip away at money that an investor has diligently squirreled away by eating peanut butter sandwiches for lunch and borrowing the latest mystery novel from the library.
By all means, use a discount broker instead of a full-service broker. In an article highlighting some of the sneaky leaks that can drain your money away, Dayana Yochim shows that the difference between 10 trades at a full-service broker and 10 at an online discounter can add up to more than $600. That's $600 that could be earning money for you, instead of filling your broker's wallet.
Bank of America charges $5 to $10 for trades, and anyone with less than the $25,000 stashed away in their accounts will still pay those charges.
Many of their customers may already be eligible for the offer. Bank of America sees many, many more potential customers out there -- 52 million of them -- who could take advantage of the free trades if only they switched banks and brokers.
Should the cost per trade be the only factor when choosing or changing brokers?
Our Broker Center contains a handy chart comparing our broker sponsors, and it shows that online trades at many discounters can be less than $20. That might be perfectly acceptable if you're not trading very often (and you probably shouldn't be).
It's also important to compare the fees for all services you might want to use, including telephone trades and stock or mutual fund research products. Ask whether additional fees might be charged: annual fees, account inactivity fees, fees for not maintaining a minimum balance, or "bad taste in movies" fees.
Ask yourself what other services you might want. Do you want to occasionally get out into the fresh air and visit a real person in an office? Do you want checks or an ATM card to access your account?
Then kick the tires a little bit. Check out the broker's customer service and find out whether it's easy to get your questions answered by phone. Look around the broker's website, and see whether it's easy to use and whether you can find the information you need.
Check out the Broker Center for more information about what to look for and what to avoid in a brokerage service.
For related Foolishness:
- Full Service vs. Discount Brokers
- The Fool's Top 10: Broker Fees
- Save: Unify Brokerage Accounts
- No More Lame Excuses