So I’ve been going through my idle accounts lately and discovered that TradeKing,* one of the cheapest discount brokers out there, has been siphoning $50 from one of my Roth IRA accounts each year for the past three years! Now, this was partly due to my own negligence (perhaps a remnant from before I became financially responsible), but still. I decided that if I was going to keep these guys on my new recommendations page, we would need to have a heart-to-heart.
Just so you know, TradeKing is known for their low price of $4.95 per trade, and before 2012 they had no account minimums. Now they charge an inactivity fee of $50 if you don’t place at least one trade in a year and you have less than $2,500 in all of your TradeKing accounts combined. Unluckily for me, I missed their notification email about all this in 2012, the same year that I withdrew most of my funds to pay for law school. Since then, I’ve left my TradeKing account balances low while experimenting with other brokers like optionshouse and Capital One Investing.
Knowing that I didn’t have a great excuse for not checking my account during all these years, I was prepared to argue my case anyway and got a TradeKing rep (Joe) on the phone. Here’s how our conversation went:
Joe: Thank you for calling TradeKing. This is Joe. How may I help you?
MMA: Yeah, I had a question about your inactivity fee. I just recently noticed that you’d been taking $50 out of my account each year for a total of $150. Can you explain this to me?
Joe: Absolutely. We charge an inactivity fee when you have less than $2,500 in your account. To avoid this fee, all you have to do is place at least one trade every year and we won’t make the deduction.
MMA: I certainly understand why you have this fee in place. What I don’t understand is how you can take $150 out of my Roth account when I can’t even take out that money without incurring a tax penalty. I left for law school in 2011 and didn’t have an income for three years. I wasn’t planning on making any trades so I didn’t actively monitor my account.
Joe: Unfortunately, our clearing partner Apex Clearing charges us that fee, and so we pass it on to the customer.
MMA: Yeah I get that. If I had been aware of this policy, there wouldn’t have been a problem. I’d have just added more funds to meet the $2,500 threshold. But I didn’t know about the policy. Plus, it’s not even that I lost $150 from investing in the stock market. I lost the money because you guys took it from my account.
Joe: Yes, I understand what you’re saying, but unfortunately, it is our policy.
MMA: Look, is there anything you can do for me, or is there someone you can transfer me to that can?
Joe: Let me put you on hold for a few moments.
30 seconds later:
Joe: Okay, we will refund $50 to your account. This is a one time courtesy because you are a valued customer. Going forward, please ensure that you make at least one trade or keep your account above $2,500 to avoid the inactivity fee.
MMA: Thank you!
Well, not the full $150 that I was hoping for, but I was happy to take it. Immediately after the call, I transferred $6,000 to my TradeKing account to avoid any further mishaps with them.
Do I still recommend TradeKing? Definitely. It’s hard to beat their cheap commissions and customer service. The inactivity fee can be a bit harsh, but the $2,500 threshold to avoid it isn’t unreasonable. After all, brokers can’t make any money if we don’t make trades.
*This referral link offers a $50 signup bonus with TradeKing. To qualify, you’ll need to fund your account with at least $3,000 and make three trades within 90 days of account opening. If you do that, I’ll get $50 too so thanks in advance!