- Brokerage firms often charge account closure fees.
- You could pay around $75 or more to close a brokerage account.
- While you may want to avoid the fee, it could be worth paying it to move to a better broker.
Don't cost yourself more money by trying to avoid a one-time fee.
If you have an account open with a particular brokerage firm and are considering closing it, you may be surprised to find you're likely to get hit with a fee. It's common for brokers to charge around $75 or more to transfer your account, and this can be a big hit to take.
To decide whether it's worth paying an account closure fee to move your investments elsewhere, here are a few key questions to ask yourself.
1. Is your current broker charging unnecessary fees?
Many brokers have reduced fees or eliminated them altogether. If your broker hasn't, then you could end up paying a commission for each transaction, a large markup to buy cryptocurrencies, high per-contract fees for options trading, or even a monthly account maintenance fee.
Over time, these costs can add up to a small fortune. In this situation, it is definitely better to pay a one-time fee to switch brokers in order to eliminate or substantially reduce ongoing investing costs for years.
2. Does your brokerage firm offer the types of accounts you need?
There are lots of different kinds of brokerage accounts you may want to invest in, including taxable individual and joint accounts, custodial accounts for children, and various types of tax-advantaged retirement accounts, such as traditional and Roth IRAs or SEP and SIMPLE IRAs for self-employed workers or small business owners.
Having the wrong type of account can be costly, as you may not have the requisite legal protections or may miss out on valuable tax breaks. If your current broker doesn't offer the account you need -- for example, because there's no access to IRAs -- then it may be worth paying a one-time fee to switch to a different one that meets your needs.
3. Do you have access to your desired investments?
If you've carefully researched investments and found one you think will perform well, it can be frustrating to find out your brokerage firm doesn't allow you to buy it. Many brokers, for example, don't offer any cryptocurrency trading, and some won't permit you to buy fractional shares.
If you find your investment options are too limited, you could be missing out on your best chance to earn a generous return based on the sound investments you've picked but couldn't purchase. In this case, paying a fee to close your current account could be well worth it if you can open a new brokerage account with a company that gives you access to the assets you want.
4. Are the broker's trading tools functional for your needs?
Some people like access to a lot of news, data, or charting tools so they can develop and perfect their investment strategy. If you want more tools than your current brokerage firm's trading platform offers, then it may be worth a switch to a broker that provides more full-featured software.
The key is to look at the big picture. If you'll be able to save money or earn potentially higher returns in the long-run by switching to a different broker, failing to do so because you hope to avoid a one-time fee could be a short-sighted mistake you’ll regret.
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