By Matt Krantz, USA TODAY

Even with discount brokerages, cost-conscious investors have to beware.

Sponsored Links

An aggressive price war between brokers has driven down the costs of trading commissions dramatically the last two years, and it now typically costs $10 or much less per trade at most discount brokerages. Yet, despite the falling commissions, investors’ satisfaction over the charges and fees they’re being hit with fell in 2011, an analysis by J.D. Power & Associates found.

Most of the disgruntlement isn’t about commissions, which are boldly advertised, but rather a bevy of hidden costs. Just 36% of investors say they completely understand all the fees they’re being charged by their brokers, J.D. Power says. And a little fee here and a one-time cost there quickly add up.

COLUMN: Mutual fund fees add up, so don’t pay more than you must

MORE: Compare online brokerages on Bankrate

By paying attention, though, smart investors can avoid nearly all these hidden fees and other charges and keep more money in their pockets. Here’s a guide to assessing what fees you should absolutely not be paying, or how to avoid them:

Exchange traded fund costs

ETFs have revolutionized trading by allowing investors to buy entire baskets of stocks or other assets with the ease of buying a share of stock. Many ETFs have annual expenses that are well below comparable mutual funds.

But since you pay the standard stock commission when buying ETFs, fees can rack up fast. An even less apparent fee to watch for is the spread — the difference between the price you must pay for the ETF and the price you’d get at the same moment selling. For instance, if you pay $10 for an ETF that you could only get $9.80 for if you sold at the same time, you’re essentially paying a 20-cent commission.

How to avoid them: If you’re paying a commission to buy or sell ETFs, stop right now. Nearly all the major brokerages, including TD Ameritrade. Charles Schwab and Scottrade, charge no commissions on many ETFs that cover the key asset classes. To avoid the cost of the spread, consult money.usatoday.com, enter the ETF symbol and look at the difference between the bid and the ask price. Stick to ETFs where the difference is only a few cents. The more popular an ETF is, the smaller the spread, which lowers the cost to you.

Transfer fees

Want to switch to another brokerage, perhaps to take advantage of commissions that better suit your investment style? Get ready to get hit with a cost many investors find to be the most outrageous: a transfer fee, or ACAT. Most brokerages charge $50 or more if you decide to move your money out.

How to avoid them: ACAT fees can be completely avoided if your portfolio is filled with money-losing investments. Rather than transferring your account, just sell your positions and take the capital loss. You can then withdraw your cash and pay no fee.

For most investors, this is either not an option or might be too severe or incur tax ramifications. In these cases, be persistent with the brokerage you’re moving to. Some, like TD Ameritrade and TradeKing, advertise they’ll reimburse your ACAT fees if you move your account to them and fulfill requirements, such as staying for a set period of time. But always ask. Many brokerage firms will reimburse the fees for new customers.

Paper fees

Brokerages are doing everything possible to eliminate paper. Most of the online brokerages charge if you want to receive paper statements. TD Ameritrade, for instance, charges $2 a month for paper statements in accounts worth $10,000 or less. Paper stock certificates are also targets for fees. Most brokerages charge either to process paper certificates or to issue you paper certificates. Typically, this is about $50 per certificate but can be much higher.

How to avoid them: Just go electronic. Most brokerages allow you to download statements in a format that you can save on your hard drive. Also inquire if you might get a break with a higher balance. TD Ameritrade offers free paper statements if you have an account worth $10,000 or more.

Fees for paper certificates may be avoidable, too. Most companies use a transfer agent such as BNY Mellon. These transfer agents will also issue you paper certificates at no charge, if the certificates are available.

Account maintenance fees

These maintenance fees typically are assessed quarterly to investors who either don’t meet balance requirements or don’t trade enough. These have been vanishing, but they’re still out there: Ameriprise charges $10 a quarter to investors with less than $500,000 in their accounts or who don’t use an Ameriprise financial adviser.

How to avoid them: Check your brokerage information and make sure you’re not being charged. And if you are, meet the limits if you wish to stay with the brokerage or switch to one that doesn’t charge a fee.

Mutual fund commissions

Investors typically focus on the trading commissions for stocks, which are prominently advertised and usually $10 or less. But investors often overlook the fact many online brokerages charge $50 to buy or sell a mutual fund if it isn’t on their commission-free list.

How to avoid them: Most brokerages have a menu of mutual funds that are exempt from the commissions, though many might have subpar performance or higher fees. You can always open a separate mutual fund account with the fund company and avoid buying and selling commissions. Also, see if the mutual fund you want has an ETF version, which you can buy at the standard stock commission, which is almost always lower.

Low money rates

This might not actually be a fee, but the effect is the same. Most brokerages pay 0% on any cash parked in the account. It’s more of a missed opportunity, says Aaron Forth, general manager of Intuit Personal Finance. Getting no interest can cost investors, who may be sitting out of the market during the recent volatility. Interest rates might be low, but investors who allow $10,000 in cash to sit around in a brokerage account might miss out on $100 a year.

How to avoid them: Be diligent about moving cash out of brokerage accounts into online savings accounts. Banks such as Discover Savings and Capital One pay about 1% on cash, and you can easily move money between these accounts and brokerage accounts.

For more information about reprints & permissions. visit our FAQ’s. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.