costs · 8 min read

How Brokerage Fees Work

Commission-free trading is genuine. It is also the least significant line on most fee schedules, and it has made the rest of the schedule much harder to compare.

Written by: Juan Manuel Gonzalez
Published: August 28, 2026

The fees that still differ, and by how much

Across the eleven US brokers we score, the published per-contract fee on an equity option ranges from $0.04 to $1.00. That is a 25-fold spread on an identical product. Meanwhile the commission on a stock trade is $0 at every one of them. If you are comparing brokers on the number that is identical everywhere, you are comparing nothing.

Fee type	Why it varies	Who it hits hardest
Per-contract options fee	Direct revenue on a product that is not commission-free	Anyone trading options at all
Account service fee	Charged annually regardless of activity	Small balances — it is a fixed cost
Inactivity fee	Charged when the account goes quiet	Long-term investors who buy and hold
Outgoing transfer fee	Charged when you leave	Anyone consolidating accounts later
Mutual fund transaction fee	Applies to funds outside the broker's own range	Investors mixing fund houses
OTC equity commission	Frequently carved out of the zero-commission headline	Anyone buying OTC-quoted securities

Where a free broker earns instead

Net interest on cash. The spread between what the broker earns on your uninvested balance and what it pays you. This is usually the largest single source.
Margin lending. Interest on borrowed money. Published margin rates in our set run into double digits at smaller balances.
Securities lending. Lending out held securities to short sellers, sometimes with a revenue share to the client and sometimes without.
Payment for order flow. Compensation from market makers for routing orders. Disclosed under SEC Rule 606.
Per-contract and product fees. Options contracts, futures contracts, crypto spreads, transaction-fee mutual funds.
Subscriptions. Paid tiers that change the rates available to you.

None of this is improper, and all of it is disclosed. But it explains why the default settings in a brokerage account rarely favour you, and why reading the sweep option and the routing disclosure is worth more than reading the marketing page.

How to estimate what an account will cost you

Write down your realistic annual activity: how many stock trades, how many option contracts, which funds.
Multiply the option contracts by the per-contract fee — and check whether the broker charges per side, which doubles it on a round trip.
Add any annual account service fee and any inactivity fee you would trigger.
Add fund transaction fees for anything outside the broker's own fund range.
Add the outgoing transfer fee, amortised over how long you realistically expect to stay.
Compare that total, not the commission.

The fee no broker charges and everyone pays

If you invest in funds, the expense ratio is charged by the fund and will usually dwarf everything your broker charges you over a long holding period. Your broker determines which funds you can reach and whether you pay a transaction fee to buy them; it does not determine the expense ratio. Any cost analysis that stops at the brokerage schedule is missing the larger number.