Trading app fees: Are you losing unnecessary money?

Whether you already trade online and want to get the best returns on your money, or you are looking to start using a trading app for the first time, it’s important to be aware of the fees that platforms may charge. 

Fees can have a big impact on your returns, so this guide outlines the types of fees to look for, why they exist and tips for reducing your costs when trading online.

Why do trading apps and platforms charge fees?

Fees are charged by trading apps and online platforms in return for them holding and managing any investments you have. Without fees, these platforms would not be able to make money. Trading platforms and apps make it easy for the everyday person to invest online, but they do need a sustainable business model to continue operating, which is where fees come in.

One of the best ways to make sure you are reducing your costs and getting the best returns is to compare different investing platforms and the fee structures they offer.

Which fees should you look out for?

With users of stock trading apps reaching more than 130 million in 2021, up from 91.5 million in 2020, it is clear that the popularity of these platforms is on the rise. However, those that are new to investing or relatively inexperienced need to know about the different types of fees involved.

Platform charge

This is a charge for using the platform and will either be a percentage of what you have invested or a flat fee per year. Some apps do not have a set platform charge, but still charge a trading fee when you are dealing shares. 

Trading fee or commission 

A trading fee, also known as commission, is charged whenever you buy or sell specific shares and it is calculated on a per-trade basis. 

Generally speaking, the more established trading platforms charge a flat trading fee, while some newer challenger apps or platforms do not have a fee per trade.

Frequent trader fee

While some platforms charge a trading fee or commission, they may discount this price for an individual trade if you are a frequent trader who uses the platform regularly. This is a reward for you continuing to use their service. The specific requirements for this will vary depending on the trading platform. 

Foreign exchange fees

Most investing platforms will charge a foreign exchange (forex) fee for moving your money into another currency if you want to buy or sell international shares. For example, if you are based in the UK but want to trade US stocks, there will typically be a per-trade fee attached to this. The exact fee will vary between trading platforms.

Minimum deposit and deposit fees

Some platforms charge a fee when you deposit into your account, but others do not charge for this. Many platforms also have a minimum deposit that you need to meet in order for your account to remain operational. 

Withdrawal fees

If you want to withdraw money from your trading account, certain platforms will charge a flat fee per withdrawal. 

Inactivity fees

Just as some platforms will reward you with a frequent trader fee, some platforms will charge an inactivity fee if you stop using your trading account regularly. This is easily avoided by making sure you access the app on a regular basis.

Do all trading apps charge fees?

Wherever you choose, you will likely be charged trading app fees of some kind, as this is how the platforms make money. However, there are a few different fee structures depending on the platform you choose. 

For example, some platforms will just charge a flat platform fee whereas others charge on how much you invest. Some will be commission-free but still charge a forex fee.

Generally speaking, trading apps aimed at beginners tend to charge less in fees, whereas the more established players and those designed for more experienced investors will have higher fees.

How do trading fees affect your returns?

While some apps allow you to trade without commission, this is not always the case with the more established platforms. the fees could be even higher, which is why it’s important to do your research on the costs of trading apps, particularly those that aren’t so obvious.

For example, let’s say the average investor makes 38 trades a year. If a platform charges £11.95 per trade, as well as 1% on a trade of £1000, that person could lose £21.95 per trade or £834.10 per year. You would hope to make a return on your investments, but you are already cutting into your profit with those initial fees. 

How to reduce fees

If you are serious about investing, trading regularly can help to limit your costs through lower frequent trader fees. You can also easily avoid any inactivity fees by making sure you access your account regularly! Once you’ve chosen a trading app or platform, make sure you are aware of all the costs it may incur before you apply. 

If you are a beginner investor, it is usually a good idea to seek out platforms with lower fees so you are not losing more money than is necessary. However, more serious investors may find that the more established platforms with higher fees offer the level of customer service they require so it depends on your personal preferences.