Last week I wrote a review of Zecco.com, one of the more popular online discount brokerage firms. Zecco is among the more popular brokerage firms because they offer 10 free trades per month for account holders who maintain a minimum of $2,500 in assets within their Zecco accounts.
Well, it appears as though the honeymoon is over. Zecco announced today that starting March 1, 2009, they will no longer offer 10 free trades per month under the current conditions. Free trades will still be available, but only under certain, more restrictive, conditions (please see below for more details).
There has been a lot of speculation that this might happen – originally, all trades were free at Zecco, until they limited it to 10 free trades per month with the $2,500 minimum assets. However, after opening over 130,000 accounts and giving away over 2.5 million free trades, it appears as though Zecco can no longer maintain their current pricing structure.
Why is Zecco ending free trades?
Zecco was able to offer customers free trades because they used the idle cash in customers accounts to earn interest. With the current economic crisis, the interest rates have plummeted, which makes this less profitable for Zecco.
Zecco’s new pricing structure (effective March 1, 2009)
Zecco’s fee schedule. The good news is that other than changing the conditions for the 10 free trades, Zecco’s pricing structure will remain unchanged. Zecco continues to have some of the most attractive commission rates in the industry. Equity trades cost $4.50 each, options trades cost $4.50 per trade + $0.50 per contract, and mutual fund trades cost $10 each. There are no account minimums or inactivity fess to worry about. In addition, free trades will still be available to traders who meet certain conditions. Here is more information about Zecco’s fees.
Free Online Stock Trading at Zecco will still be available
Effective March 1, 2009: Zecco will still offer free trades to account holders who maintain a minimum balance of $25,000 in assets within their Zecco account, or make at least 25 total trades per month will also qualify for 10 free stock trades per month. It is important to note that there is a maximum of 10 free stock trades per month and that the free stock trades are not cumulative, nor do they roll over to later months.
Zecco is still a good option for a discount brokerage
I think Zecco is still a good option for many people because they offer competitive commissions on stock trades, and because of the many extras Zecco offers. Some of the extras include the online community, investing learning center, research center, tools and more. You can read more about what they offer in the Zecco review I recently wrote.
If you are a frequent day trader, you may not notice any difference in the new fee schedule. If you only trade one or two times per month, this will affect you more and make Zecco’s main competition, namely TradeKing, ShareBuilder, and OptionsXPress, more attractive.
{ 5 comments… read them below or add one }
I thought this would happen eventually, but I am still disappointed. While $4.50 a trade is still about as low as it gets, the other discount brokerages probably have better investing tools. At least they are holding strong with no account minimums or inactivity fees.
I can see Zecco losing a lot of business because of this. Hopefully when the interest rates start increasing again, Zecco will revert to the previous free trade methods, but I don’t see that happening.
Steve: I agree – I’m disappointed, and I don’t see them ever going back to the free trades. These kind of changes usually only happen in one direction. With the new rate changes, I think I will do the majority of my investing through TradeKing (review) because I prefer their interface and tools over those of Zecco.
At this point I have an account Vanguard (retirement account), Schwab (gifted Target stock) and ShareBuilder, which I opened a week ago for the $90 costco bonus. I also have a Lending Club account that was also opened for a bonus.
Otherwise, I don’t have any experience with discount brokerages. I will continue opening accounts when bonuses are available. Hopefully, in the near future I will have some play money to invest with to take advantage of some of these discount brokerages.
Ahh, you missed the $50 TradeKing Promotion that ended in November of 2008. I signed up for an account via that promotion, and I to be honest, never would have gone with Zecco if it weren’t for the free trades – TradeKing meets all of my needs (which I admit are limited) and then some. Their investing tools are excellent and they are all free. Zecco charges for some of theirs.
I did miss the promotion. I will be on the lookout for another one. Im in no hurry to open an account with tradeking until I have some play money to use, which is after I fully fund my retirement accounts. After your strong recommendation though I will most likely use tradeking for my investing.