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I currently have 30 free trades per month with a brokerage firm due to my account balances at their banking arm. I will typically trade a few shares of various companies in very small dollar amounts. For example, 5 or 10 shares of Ford or General Mills. If I were at a firm like Fidelity, I would pay $8.00 for each of these, making a big dent into the actual securities purchased.

I earned a completely paltry $3.33 YTD over the last 9 months on my savings at my bank presumably in exchange for these "free" trades. In considering the move to a commissioned broker, is the tipping point as simple as 'when the interest I could have earned outweighs my commissions I would have paid' - it's time to switch?

It's a bit of a mind game. I'm not "paying" to make the trade, but I acknowledge that I'm not making anything in interest.

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    If you really are trading 5 to 10 shares, a full-service broker is likely to charge you more for these small transactions than if if you are trading in multiples of 100 shares (round lots). – Dilip Sarwate Sep 6 '15 at 3:36
  • Yeah, once you switch to a broker (Schwab, TD, Fiedelity, etc) you will pay ~$8 a trade on BOTH ends. Don't forget that part. So given that I would never purchase in blocks under $1000 as the commissions begin to eat at your basis. – Ross Oct 6 '15 at 12:47
  • Does your brokerage offer a dollar-cost-averaging program with a reduced fee structure? Or can you consider mutual funds, which are much more efficient for smaller investment amounts? – Kent A. Oct 6 '15 at 12:53
  • Third option: No brokerage. Mutual fund companies often are able to set up direct customer accounts. – keshlam Nov 5 '15 at 19:38
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Emotion aside, you can calculate the cost of the funds you have tied up at the bank. If I can earn 5% in a CD, my "free" checking with minimum $5000 balance really costs me $250/yr. You have money tied up, I understand, but where would you place it otherwise, and at what return?

The subject of frequent trading even at zero cost is worth addressing, but not the real subject of your question. So, I'll leave it for elsewhere.

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Unless you're an active trader, 30 trades per month is a number you'll probably never hit, so you might as well take advantage of the offer while you have it. But don't trade more than you normally would. Discount brokerages make money on the arbitrage between the bid and ask prices on the exchanges (legal as long as you get a price that was available on the open market - they disclose this in the fine print in your account paperwork). So they want you to trade as often as they can get you to.

As you say, it's really just a mind game. There is always a cost to doing business with a bank or brokerage. They charge you fees for services and they make money on your deposits while you're not using them. So while it looks like they're paying you interest, which they are, they're not paying you all the interest they've earned using your money. So there's the cost. It was only when interest rates dropped so low that they were starting to feel it, that they started rolling out more overt fees for services. If you'll notice, the conditions that cause the fees to be waived in your account all lead to increased deposits or transactions, either directly or indirectly.

If your main concern is the efficiency of your investments, which by your description appear to be rather modest, you should consider dollar-cost averaging (DCA) into a mutual fund (of which there are plenty of high quality no-load/no-fee options around), or into a stock if your brokerage offers a lower-fee DCA program for stocks (where you can often buy partial shares).

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The first consideration for the banking part of your portfolio is safety. In the United States that is FDIC protection, or the equivalent for a Credit Union.

The second consideration is does it have the level of service you need. For this I mean the location of branches, ATMs, or its online services meet your needs for speed, accuracy, and ability to access or move the money as you need.

The rest are then balanced on the extras. For your situation those extras include the ability to make free trades. For other it might be a discount on their mortgage. For others it is free checking.

In your current situation if the first two things are met, and you are using those extra benefits then don't change. For me the free trades wouldn't be a benefit, so any major degradation in the safety and service would cause me to leave.

Keep in mind that free services exist to entice you to make a deposit: which they can then make money by lending it out; or they offer a free service to entice you to use a service they can charge you to use. All Free services come with a cost.

I earned a completely paltry $3.33 YTD over the last 9 months on my savings at my bank presumably in exchange for these "free" trades.

Without knowing how much you had deposited in your savings account there is no way to know how much you could have made at the bank across the street. But with the low rates of the last decade there is not big money to be made off the emergency savings of a typical american family.

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