Welcome to the pioneer of commission-free trading “Robinhood”. So whenever you are going to participate in trading stocks and options, you always look for the brokerage you have to pay for trading. And Robinhood is the one that levied zero brokerage fee for trading in stocks and options.
Robinhood not only provides the option of commission-free trading, but it also educates the beginners on “how to trade”. It’s simple and flexible web and app layout is exceptionally attractive to low-cost investors who want to do business for a small amount.
Robinhood offers a sophisticated smartphone app with commission-free trade, and this will be the future of the money. But it is not for all types of investors, the guarantee of free trade on Robinhood is too high. If you think everything is free on Robinhood, you are wrong here, there are lots of things that are not free.
Let’s know about how “free trading” on Robinhood is not “actually free”.
What is the Reason Behind the Phrase “Free Trading on Robinhood is not Free”?
Everybody when enters into trading, the first thing he wants to know about is the cost of doing business, what other brokers are charging for trade? What is the hidden fee? Because these are the things that help you to make better decisions for trading.
Let me tell you about Robinhood.
The strong point that makes Robinhood different from its competitors is its commission-free trading offer. But what do you think as a client and investor, is this commission-free trading platform worth it? This is the point when we call the “free” has some “fee”.
You have to pay during the transfer of your accounts to other brokers, you have to pay for a surcharge per trade cost on restricted accounts, for live representatives, for trading in a foreign security, for Robinhood Gold subscription, regulatory fee, wire transfer fee, etc.
So, you need to understand that freebies offered by brokerage firms are not always free. The fee structure of Robinhood is very generous, and investors have to pay high prices that cause them to lose money.
Yes, there is a fee structure that is associated with your Robinhood account but you might not focus on it.
Whenever you want to transfer your account to your competing brokerage firm through the ACAT system, you have to pay a fee of $75 to transfer your account. Together with this, they will charge a surcharge of $10 on each trade if you use a controlled account for any reason. And when you want to submit your orders using a direct representative over the phone, you have to pay the cost associated with it which is $10.
If you want to trade in foreign security then you have to pay a cost of $50 as a transaction fee and if in case you want to cancel or adjust your order, you need to pay a fee of $15.
Now comes to their premium plans, their exclusive margin service i.e. Robinhood Gold. You will be charged a monthly fee for this plan. The fee depends upon your account size. Will discuss it deeply in the next points.
Robinhood Other Fee
Robinhood levied a wire transfer price of $25. Besides, if you want to transfer international wire you have to pay a fee of $50, and for domestic overnight check delivery, you need to pay a fee of $35. The Return check cost is $30.
Customers also have to pay a regulatory fee, which includes the SEC fee. The overall fee is usually up to or round off to the nearest penny.
On stock sales, you have to pay a trading activity fee of 0.0119 cents which is also round off to the nearest penny. Thus this fee is crowned at $5.95 per transaction.
Robinhood customers face a stiff challenge while using a broker. If they want customer services after the market hours, they will not get them. Robinhood provides its services only during market hours. Its phone numbers are also not tool-free, merchants can quickly lose money by delaying customer service periods.
All in all, we can say that Robinhood is providing free equity trades but you have to sacrifice in other areas. Even if the brokerage firm does not have high fees, be aware of what you may not get before opening an account.
The investors who trade on a daily basis and move large amounts of shares, I am suggesting that you must do your research and inquire about the benefits of zero commission fee and check whether it is beneficial for you or just an offer by sacrificing much more things.
# Robinhood Gold
Robinhood Gold members are eligible to keep their access to Nasdaq market data and Morningstar professional research reports. For the initial 30 days, no fees will be charged by you but after that, you have to pay a $5 monthly fee. Together with this if you borrow over $1,000, a yearly interest fee will be levied with a 2.5% interest rate. And to keep your margin account in running you need at least $2,000 in your portfolio.
# Regulatory Trading Fee
It is another Robinhood hidden fee, that is associated with investors in terms of regulatory fee. As you know, Robinhood is registered with the Financial Industry Regulatory Authority (FINRA) which is a US-based broker-dealer regulatory firm. For industrial regulations, Robinhood needs to pay some amount in support of the costs incurred with regulatory firm FINRA. Robinhood passes certain brokerage fees to its customers, it includes-
# Trading Activity Fee
When customers sell more than 50 shares of their stock, they have to pay an activity fee. On equity shares, the fee is $0.000119 per share and for options trading, the fee is $0.002 per contract. Based on the order activity the limit on the fee is $5.95.
# Regulatory trading fee
In the Regulatory trading fee, when you make sales, then per $1 million of principal you have to pay $5.10. You will be excluded from the fee till $500 sales.
# Transfer Fee
Robinhood never charges for money transfer from one account to another, except for these two transfers:
# Outgoing ACATS fee
ACATS is an Automated Customer Account Transfer Service. It is a service that facilitates the process of customer accounts transfer. If you transfer your account from Robinhood to its rival firm you have to pay $75 for every transfer. But if you want to transfer money into your bank account you need not pay any fee.
# Domestic overnight check delivery fee
If you want to send a cheque to US-based businesses and individuals, Robinhood helps you out to send those cheques without any fee. But if you want your cheques to be sent overnight you have to pay a $20 fee.
# Potential Fee
When it comes to the transactions, Robinhood never charges any fee. But when it comes to third-party services you need to pay for that. This fee is in terms of brokerage amount and will be passed to your brokerage account.
# Foreign transaction fees
If you want to make foreign transactions that too in US dollars, you might need to use your Robinhood debit card, and to use that card you have to pay a currency conversion fee.
# Out-of-network ATM fees
If you want to use ATMs with Robinhood’s network you need not pay any fee, but if you use Out-of-network ATMs you need to pay a certain fee.
# American depositary receipts
American depositary receipts or ADRs are the certificates that represent foreign stocks of American exchanges. For these certificates, you need to pay the fee of $0.01 to $0.03 per share called a custodial fee to the banks who issue these certificates.
# Merchant-imposed fees
Some merchants charge a minimum or certain fee whenever you use a debit card for the transactions.
# Returned check, ACH, recall/stop payments
To handle return cheques Robinhood never charges any fee, but the banks from where the cheque originated or the recipient bank levied a certain amount of fee on you.
# Service Fee
Robinhood charge a certain amount of service fee for providing hassle-free services, these include-
# Paper Statement
If you want to receive a physical copy of your share purchase statement you need to pay a fee of $5 per month that is called a paper statement fee.
# Paper Confirms
There is a document consisting of all the details of a trade completed through your account, if you want that document you need to pay $2 for every piece of document.
# Domestic overnight mail
If you want to mail overnight in the US you need to pay $20 to Robinhood, this mail will be sent by Robinhood so they charge for this.
# International overnight mail
If you want to send mail overnight to another country $50 will be charged by Robinhood.
Whenever a customer opens his new account with Robinhood, he will be offered free stock. The customer just has to sign up through the promotional page and needs to link his bank account (checking bank account).
To sign up using a smartphone, they want a Social security number, bank account, and mobile device.
Follow the below steps to open a new account and get your free stock:-
Step 1: Set up the account.
Step 2: Enter your contact information.
Step 3: Verify your identity.
Step 4: Fund your account.
Step 5: Apply.
Step 6: Download the app.
Step 7: Log in to the app.
As you link your bank account, Robinhood will add free stocks to your account.
You can also do this using a referral program. For every referral, both the referred and referee will receive a rewarding stock as soon as the referee signs up and links their bank account. With this, you can receive around $500 free stocks yearly.
Here are the steps for the referral program:-
Step 1: Tap the Account icon in the lower right corner
Step 2: Tap on getting Free Stock
Step 3: Tap Invite Contacts.
Step 4: Tap on the invitation next to the friends you want to suggest.
While receiving the free stocks, always keep in mind that the stock will not be automatically credited to your account, though you will get the notification which you need to check before 60 days, otherwise you will fail to claim your reward. If you want to sell your stocks, you can sell them after 2 working days.