Is it worth paying a fee to close a brokerage account?
Don’t cost yourself more money trying to avoid one-time fees.
- 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 fees, it might be worth paying them to upgrade to a better broker.
If you have an account open with a particular brokerage firm and are considering closing it, you might be surprised to find that you may be hit with fees. It’s common for brokers to charge around $75 or more to transfer your account, and that can be a big hit.
To decide if it’s worth paying an account closing fee to move your investments elsewhere, here are some key questions to ask yourself.
1. Does your current broker charge unnecessary fees?
Many brokers have reduced fees or eliminated them altogether. If your broker didn’t do this, you could end up paying a commission for every trade, a large markup for buying cryptocurrencies, high per-contract fees for trading options, or even monthly maintenance fees. account.
Over time, these costs can add up to a small fortune. In this situation, it is certainly better to pay a one-time fee to switch brokers to eliminate or significantly reduce ongoing investment costs for years.
2. Does your brokerage firm offer the account types you need?
There are many types of brokerage accounts you may want to invest in, including taxable single and joint accounts, child custody accounts, and various types of tax-advantaged retirement accounts, such as traditional and Roth IRAs. or SEP and SIMPLE IRAs for self-employed or small business owners.
Having the wrong type of account can be costly, as you may not have the required legal protections or miss out on valuable tax breaks. If your current broker does not offer the account you need – for example, because there is no access to IRAs – then it may be worth paying a one-time fee to switch to another that meets to your needs.
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3. Do you have access to the desired investments?
If you’ve researched investments carefully and found one that you think will work well, it can be frustrating to find that your brokerage isn’t allowing you to buy it. Many brokers, for example, don’t offer any cryptocurrency trading, and some won’t let you buy fractional shares.
If you find your investment options too limited, you could be missing out on your best chance of earning a generous return on the smart investments you chose but couldn’t buy. In this case, paying a fee to close your checking account might be worth it if you can open a new brokerage account with a company that gives you access to the assets you want.
Some people like to have access to lots 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, it may be worth upgrading to a broker that provides more comprehensive software.
The key is to look at the big picture. If you are able to save money or gain potentially higher returns over the long term by switching to another broker, not doing so because you hope to avoid one-time fees could be a short-sighted mistake. . regret.
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