Bank of America announced today that it would offer up to 30 free online stock trades for clients that have more than $25,000 in accounts at the bank. This is big news for several reasons.
Bank of America has about 50 million customers. About a third of those customers are expected to qualify for this deal. The large number of potential users makes this by far the largest such offer to date.
The $25,000 qualifying amount is the lowest we have seen. Other offers have been from $250,000 to over $1,000,000.
This will put enormous pressure on the other online brokers and may well force many of them out of business. Bank of America can make their money on other services they provide to the clients. Smaller on line brokers cannot recoup costs in the same way.
What does this mean for investors? The cost of stock trading will continue to come down. If you use a discount on line broker you will want to monitor their financial health to avoid delays in accessing your funds. Overall, I would call this a net positive.
I was pretty enthused by this information as well. I have my brokerage and retirement accounts with Fidelity, and recently 'linked' my account with my fathers in order to take care of the lower commission fees. I know other platforms have lower fees than $8/trade, but for the consolidation and simplicity, it can't be beat.
I don't know if this will cause me to switch to BofA however.
Posted by: Jason | October 12, 2006 9:57 PM | Permalink to Comment