But don't choose a discount broker on the basis of commission alone. Also watch out for extra charges, such as a charge to receive a stock certificate in your own name or charges for closing an account. The interest paid on your account may be lower than another discounter, and the broker may even have requirements for a minimum amount of trading. Fee schedules for discounters vary substantially, depending upon the firm, the price of the stock, and the quantity of shares bought or sold. Many firms charge a minimum commission rate, which means that you will pay the minimum commission for any trade in which the firm's commission, according to its schedule, is less than its minimum.
Discounters use different methods to determine commission rates.
For instance, some firms use the dollar amount of the transaction to set rates, while other firms base their commissions on the number of shares ordered. The commission rate also varies with the type of security traded. Some firms offer volume discounts or rebates. When choosing a discount broker, you should first determine what types and sizes of trades you normally do, and compare the fee schedules. Most discounters claim commission savings in the form of a percentage off full-service commission rates or other discount brokerage rates.