Is Firstrade brokerage app and IRA (ROTH, Traditional) account free of charge to open and use? Is stock trading on Robinhood free to all clients?

Are Robinhood and Firstrade Free?

Robinhood and Firstrade are arguably the most popular discount brokers currently offering commission-free trading. This has made both brokers quite popular, especially with millennials and those looking to get their feet wet in the markets with less capital. While trading is free, there are still a few features and services they offer that aren’t free. This article will go over what makes these two brokers “free” along with the extras that come with a cost.

Commission-Free Trading

As we mentioned, trading is completely commission-free at Firstrade and Robinhood. Both brokers allow you to trade stocks, ETFs, and options for free. In addition to these security types, Firstrade also lets you trade mutual funds and bonds, which as we’ll explain next, are not always entirely free. Robinhood doesn’t offer fixed income or mutual funds.

Trading mutual funds at Firstrade is free so long as you hold it for at least 90 days; if not you will be charged a $19.95 short-term trading fee. They also enforce a $500 minimum initial investment per mutual fund, and a $100 minimum for subsequent purchases. Fixed income trades at Firstrade are commission-free but note that the bid/ask spread they quote on these instruments includes a small markup to compensate them for acting as middle man.

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Account Fees

Neither Robinhood nor Firstrade charge account maintenance or setup fees or have minimum balance requirements. The one exception to this is if you have a margin-enabled account, in which case you must maintain a minimum account balance of $2,000. This is an industry-wide requirement for margin accounts and is not unique to these two brokers.

Robinhood Gold

In order to enable margin access in your Robinhood account you need to upgrade to their premium membership level, called “Robinhood Gold” for a flat $5 monthly subscription fee. Gold level gives you instant access to your deposits (no waiting for the three day settlement period) among other perks, along with access to margin capital with applicable interest charges. Your $5 monthly subscription automatically gives you access to $1,000 of margin capital to borrow interest-free, but any amount borrowed above the $1,000 will incur a 5% annualized interest charge.

Firstrade Margin Rates

Firstrade doesn’t have a subscription charge for those looking to use margin, but on the flip side the interest they charge on any borrowed capital is higher. Their borrowing costs start out at 9.75% for small amounts, and gradually drop to 5.5% once your margin balance reaches $1,000,000. Robinhood Gold seems like a better deal if you plan to use margin.

Regulatory Fees

Regulatory fees are generally insignificant, but are nonetheless passed onto investors by all brokers, including Firstrade and Robinhood. These literally amount to pennies per trade, and are levied by the SEC and FINRA.

Other Less Common Fees

Firstrade has some additional fees that only apply to investors that choose specific account options, which are easily avoidable. For example, they charge between $30 and $50 for outgoing wire transfers, but this can be avoided by simply using electronic or ACH transfers, which are free at Firstrade and Robinhood.

Another example of an easily avoidable Firstrade fee is their charge for choosing to get monthly account statements through the mail in physical form. This can be easily avoided by electing to get electronic statements online, which is the only option Robinhood gives its users.

Is Robinhood Free Summary

In conclusion, both Firstrade and Robinhood are widely free to use and trade on. Both brokers offer either additional features or optional settings (i.e. paper statements) that do incur additional fees, but these are optional and not necessary to fully take advantage of either broker’s platform.

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