Is E*TRADE really free?
E*TRADE is in fact a zero-commission broker when it comes to buying and selling US stocks. Zero commission is especially useful if you trade relatively low volumes, like buying stocks for less than $500 per trade, because you won't be hit with any minimum fees the broker might charge.
We should note that the payment-for-order-flow model, which is used by some zero-commission brokers to generate income (rather than relying on commissions), could potentially create a conflict of interest between you and your broker. This could result in trade execution (like routing your orders to specific market makers) that might be unfavorable for you under certain market conditions, especially when using market orders (as opposed to limit orders, which seem to be less affected).
Keep in mind that at some brokers, you could incur non-trading charges like withdrawal or inactivity fees. If you want to trade options, bonds or futures, then a transaction fee may also apply. Also, if you trade on margin, the margin rate charged by brokers can differ wildly. In the next chapter, we'll find out what these charges are at E*TRADE and how they compare with fees charged by its closest competitors.
Overview of E*TRADE fees and charges
It's safe to say that E*TRADE's fees are low in general. They either don't charge a brokerage fee for things that other brokers do, or they only charge a small amount.
Here's a high-level overview of E*TRADE's fees
|Assets||Fee level||Fee terms|
|US stock fee||Low||Free stock and ETF trading|
|EURUSD fee||-||Not available|
|US mutual fund fees||High||$19.99 per trade; ca. 4,500 free mutual funds|
|Inactivity fee||Low||No inactivity fee|
E*TRADE fees explained
Online brokerages in general charge much lower brokerage fees than traditional brokerages do - this is largely because online brokerages' businesses can be much better scaled: from a purely technical standpoint, it doesn't make that much of a difference for them if they have 100 or 5,000 clients.
This is not to say, however, that they don't charge any fees at all. They make money by charging you various rates for various actions or events. Usually you need to keep an eye on the following three types of fees:
- Trading fees - these are brokerage fees that you pay when you actually carry out a trade, like buying an Apple share or an ETF. What you pay is either a commission, a spread or a financing rate. Some brokers apply all of these.
- A commission is either fixed or based on the traded volume.
- A spread is the difference between the buy price and the sell price.
- A financing rate or overnight rate is charged when you hold your leveraged positions for more than one day.
- Non-trading fees. These are usually related to some operations you carry out in your account, such as depositing money, withdrawing money, or not trading for an extended period.
We compare E*TRADE fees with its closest competitors, Charles Schwab and Fidelity.
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E*TRADE trading fees
E*TRADE's trading fees are low, which makes it suitable for you even if you trade often (i.e. several times a week).
Let's break down trading fees according to the different asset classes available at E*TRADE.
E*TRADE's trading fees are low.
Stock fees and ETF fees
E*TRADE has low stock trading fees.
E*TRADE fund fees are high.
|EU mutual fund||-||-||-|
E*TRADE has low bond fees.
|US Treasury bond||$0.0||$0.0||$0.0|
|EU government bond||-||-||-|
E*TRADE's options fees are low.
|US stock options||$6.5||$6.5||$6.5|
|US stock index options||$6.5||$6.5||$6.5|
|UK stock index options||-||-||-|
|German stock index options||-||-||-|
E*TRADE's futures fees are average.
|US micro e-mini stock index futures||$15.0||$15.0||-|
|UK stock index futures||-||-||-|
|German e-mini stock index futures||-||-||-|
E*TRADE margin rates are high.
|USD margin rate||9.0%||8.3%||8.3%|
|EUR margin rate||-||-||-|
E*TRADE non-trading fees
When it comes to non-trading fees, E*TRADE is a rather cheap broker.
Non-trading fees include various brokerage fees and charges at E*TRADE that are not related to buying or selling assets. This can be a withdrawal fee, deposit fee, inactivity fee or account fee.
E*TRADE deposit fee
Usually, brokers don't charge anything for deposits, and E*TRADE is no different.
E*TRADE withdrawal fee
E*TRADE generally doesn't charge a withdrawal fee.
|Withdrawal fee for bank transfer||$0||$0||$0|
E*TRADE inactivity fee
E*TRADE does not apply an inactivity fee, which is great because your account won't be charged even if you do not trade for an extended period (like several months or years).