[Below is a guest post from Bullishness.com. More information about the author and Bullishness are at the end of the article.
Many of you probably know about how Zecco offers free stock trades, but did you know Zecco isn't the only online stock broker that does this? If you're an investor with a fairly large portfolio, there are two other options for free stock trades available to you: Banc of America and Wells Fargo. You've probably heard of these financial service providers before but you probably didn't know that they offered free trades. This article will cover the requirements, and commission structure for each free online stock broker to give you a better idea of what your options are.
Zecco ( Zecco Commission Schedule )
Although Zecco doesn't spend a lot on TV, newspaper, and magazine advertising, their online presence is hard to ignore. Zecco made a huge splash when they launched in 2006 being the first broker ever to offer free stock trades. When I first heard about Zecco, I was a bit skeptical, but they have managed to continue their business successfully serving over 130,000 customers. Their customer base is a drop in the bucket compared to other more established online stock brokers like E*Trade, but they do serve a smaller niche and definitely spend less money on big media advertising (E*Trade ads on the Superbowl anyone?).
Now, if you're getting free trades from anyone you have to be wondering what the catch is. Well, with Zecco, there are two main limitations. The first is that you need a balance of at least $25,000 in your account and you only get 10 free stock trades per month. After your 10 free stock trades are used, your rate goes up to $4.50.
Banc Of America ( Banc Of America Commission Schedule )
Banc Of America offers stock brokerage services, which may come as a surprise to some of you. The name of their brokerage division is called Banc Of America Online Investing, or BAIS for short. Although Banc Of America is a more established and traditional financial service provider, they're doing a lot to compete with smaller and newer online stock brokers. You can open an account with as little as $0.00 and, of course, qualify for free trades.
So what is required to qualify for free trades from Banc Of America? The minimum balance requirement is $25,000, just like Zecco, but unlike Zecco, Banc of America offers 30 free trades per month compared to Zecco's 10 free trades per month. After using your 30 free trades, the rate goes up to $7.00 per trade, which is more than Zecco's $4.50 per trade.
Wells Fargo ( Wells Fargo Commission Schedule )
Wells Fargo is another established name in banking that also offers stock brokerage services and free trades. You've probably heard of them before and might even have a checking or savings account with them. The official name for Wells Fargo's investing division is WellsTrade. Wells Fargo offers a slightly different commission structure than both Zecco and Banc Of America.
Just like Zecco and Banc Of America, Wells Fargo requires $25,000 to qualify for free trades. The number of free trades offered by Wells Fargo is 100 per year, which comes out to 8 trades per month. After using your free 100 trades, the rate goes up to $5.95 per trade which is more than Zecco's $4.50 flat rate and less than Banc Of America's $7.00 flat rate. Doing a little algebra shows that if you have a minimum balance of $25,000, your trade costs with Wells Fargo will never exceed your trade costs with Banc of America.
How Does Each Free Broker Size Up?
Although each broker's minimum balance requirements are all the same, they all offer different amounts of free trades and commission rates after the free trades are used. Below is a graph showing how your costs would add up with each broker per month.
If you make 8 trades per month or less, you can take your pick from the three free brokers and your trade costs won't change. If you make 9 to 66 trades per month, your lowest trade costs would be with Banc of America. Beyond 66 trades per month, Zecco takes the clear advantage over the other two free brokers. One thing to keep in mind is that this analysis assumes 8 free trades would be used per month from Wells Fargo, even though they alot free trades on a per year basis. In other words, trading more during a certain time of the year would affect how beneficial free trades given per year would be. Hopefully the above chart and analysis gives you a good understanding of what your costs would be with each broker.
Hopefully those of you with $25,000+ to invest in the stock market can eliminate your trade costs completely. And if you don't have $25,000, it's definitely a good goal to start working towards. While $25,000 is no small amount of money, if you live below your means and make the most out of the money you earn, it certainly wouldn't be impossible to save that much money. Happy trading everyone!
Full Disclosure: As of this writing (November 2, 2009) Bullishness.com and the author of this article are not affiliated to any of the aforementioned online stock brokers.
[Parts of this article have been corrected since original publication]
[About The Author: Hello readers of LazyManAndMoney, my name is Soo-Young and I'm a financial mathematics graduate student and the creator of Bullishness.com, the largest and most comprehensive online stock broker comparison site on the internet. Bullishness.com has many unique features that help investors every day. Unlike other stock broker comparison websites, Bullishness.com automatically checks and updates its pricing information every 24 hours using a special price checking script. Bullishness.com also has the largest catalog of online stock brokers available on the internet. Finally, as of this writing (November 2, 2009), Bullishness.com is not affiliated to any online stock brokers, giving you the most unbiased and independent comparison information possible. Take a look around, and if you have any comments or suggestions, I'd be happy to hear from you ([email protected]). And if you're in the Twin Cities area, let me know and we can chat over a beer (my treat).]
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