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Is there a difference between brokerage fee and commission?

Is there a difference between brokerage fee and commission?

Brokerages earn money by charging their clients for various products and services. In general, most of their charges fall under the category of fees, which may include various brokerage fee types, including, but not limited to, commissions for trading. So basically, commission fees are just one type of brokerage fee. Let’s take a closer look at the different types of brokerage fees and what they mean.

Brokerage fees vs commissions
The essence

  • Brokerages can charge various types of fees, including for trading and for non-trading services.
  • A commission charged for trading transactions is just one type of brokerage fee.
  • Some brokers do not charge any commissions (fees for trading).
  • You can use a brokerage fee calculator to easily compare brokerage fees.

Brokerage fees vs commissions
What are brokerage fees?

Brokerage fees cover a wide range of costs that your online brokerage charges when you have an active account with them. These fees vary from broker to broker and can impact your returns. 

There are two types of brokerage fees you need to keep an eye on:

  • Trading fees: these brokerage fees occur when you make a trade. Trading fees typically include the following:
    • Commission: the fee you pay your broker to execute a trade. This is usually based on traded volume or charged as a flat fee.
    • Spread: the difference between the buy and the sell price, or in other words, the bid and the ask price.
    • Margin rate: trading on margin basically means that you borrow money from your broker to trade. The broker will charge you interest for the borrowed money. 
    • Financing rate or overnight rate: this is charged when you borrow money from a broker to trade (on leverage) and you hold this position for more than a day. A typical example would be a forex trade or a CFD trade.  
    • Currency conversion fee: this is charged when your transaction requires a currency conversion.
  • Non-trading fees: these are fees charged by your broker for services not directly related to trading. Non-trading fees typically include the cost of depositing money, withdrawing money, or not using the broker for an extended amount of time (inactivity fee).

 

Brokerage fees and their amount are different at each broker. For example, a stockbroker will not charge a financing rate, but it might charge withdrawal fees.

Brokerage fees vs commissions
Do all stockbrokers charge a commission?

While many, or even most, online brokerages today still charge a commission for trading, in recent years an increasing number of brokerages, especially in the US, have started offering commission-free trading. Be aware however that commission-free trading is not the same as completely free-of-charge trading. Even though the broker does not charge a fee for executing a particular trade, it may and most often will charge other fees and costs.

Some of the brokers that offer commission-free trading are Interactive BrokersWebullFidelityTD AmeritradeE-TradeeToroCharles Schwab and Robinhood.

Brokerage fees vs commissions
Compare brokerage fees

A good way to see how much brokerages charge in fees and commissions is to use a tool called a brokerage fee calculator. Check out BrokerChooser’s own brokerage fee calculator to calculate exactly how much you will pay in trading fees at a given brokerage, or see which brokerages have the best offer for your planned stock trade.

 

Further reading:

Author of this article

Tamás Deme

Author of this article

Tamás believes in clear and simple writing that is accessible to everyone. He has more than 20 years of experience as a financial journalist, as well as an editor and proofreader. He previously worked at Interfax news agency and wrote about M&A deals for EMIS DealWatch.

Tamás Deme

Content Editor

Tamás believes in clear and simple writing that is accessible to everyone. He has more than 20 years of experience as a financial journalist, as well as an editor and proofreader. He previously worked at Interfax news agency and wrote about M&A deals for EMIS DealWatch.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology

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