Schwab Reduces Online Stock Trade Commission to $8.95
Jan 07, 2010 
Sun
Full service broker Charles Schwab announced today (press release, PDF file) that it is reducing commission for online equity trades. Starting January 19th, Schwab customers will pay a flat $8.95 commission for each online stock trade, regardless the number of shares. The current commission schedule charges $12.95 per stock or ETF (exchange-traded fund) trade if the customer trades less than 120 times in a calendar year, plus extra fee for trading more than 1,000 shares in each order. If you have more than $1M assets with them or trade 120 times or more a year, you already pay the reduced commission, but the bar is rather high for small investors. Under the new pricing plan, the commission for automated phone trades is $13.95 (online commission + $5) and broker assisted trades $33.95 (online commission + $25).
Schwab has made some big moves lately to be more competitive. Early last year, it introduced Schwab Invest First credit card that allows cardholders to move cash backs (at 2% which is quite generous) earned from using the card into Schwab brokerage account so they can invest the money. Later it cut expenses on some of its index mutual funds, making them even cheaper than similar offers from Vanguard. At the end of the year, it launched some extra-cheap ETFs to compete with Vanguard and iShare, etc.
When I compiled a list of discount brokers with cheapest commissions last year, I excluded Schwab because at $12.95, I didn’t consider it as a discount broker. Now that it is reducing the fee to $8.95, Schwab will get a spot in the list. That said, is Schwab a discount broker? Well, not according to my standard. For example, you can trade stocks and ETFs at lower commission rates at :
- Scottrade: $7.00/trade
- Firstrade: $6.95/trade
- TradeKing: $4.95/trade
- Zecco: $4.50/trade
- SogoTrade: $3.00/trade
- OptionsHouse: $2.95/trade
There’s no doubt that the new, lowered commission will attract new customers to Schwab, especially those who are interested in Schwab’s mutual fund and ETF products (there’s no commission to buy Schwab mutual funds through its brokerage account), but I feel the change will benefit more to their existing customers. For me, I don’t see myself switching to Schwab any time soon, if at all. I am still happy with the brokers I am using right now and commission cost is one of the most important factors when deciding which broker I want to use. At $8.95/trade, it’s still not cheap (since Schwab is a full service broker, its overhand should be much higher than its smaller rivals, which will prevent it from reducing the commission too much IMO).
Interesting that you call Schwab a “full-service” brokerage firm. Schwab was actually the pioneer of the discount brokerage industry!
That said, I definitely see what you’re saying: they offer more services as well as charge more per trade as compared to the newer discount brokerages–TradeKing, Zecco, etc.
I could have mistaken Schwab as a full-service broker. I am not very clear about its past, but from what it is offering now, mutual funds, ETFs, wealth management, etc., it just doesn’t look like a discount broker that only offers a trading platform any more.
I’ve been with Schwab for about 3 years, and have loved the firm–all my accounts have been consolidated there.
This is just icing on the cake.
Now Schwab charges no commission when you trade Schwab ETF! Now that’s a big saving (and potential day trading).