When investors plan to open a Demat account with an online stock market app, they should be equally involved to be financially literate about the charges involved. Since the online Demat account makes the entire trading process online, there are certain charges involved that the investor is required to pay.
Online trading is convenient as it helps to save time and reduces the burden of documentation as all necessary data is available at the click of a button. The below information will help you as an investor to make informed decisions regarding the functioning of your Demat accounts.
Demat Account Opening Charges
The Depository Participant is required to be present at the time of opening of a Demat account. Banks or brokerage firms offer their existing customers the facility to open a Demat account with them so that all their banking and trading activities can be centrally managed. In recent cases, the DP offers the client the option to open the account free of cost but may levy a charge from the second year.
The idea of a free Demat account opening may appeal to several investors. However, it is to be noted that it does not guarantee a good quality of service. The investor needs to be mindful and check the history of the DP by going through the testimonials of existing customers.
Demat Account Maintenance Charges
Once the Demat account is active, the customer must pay annual maintenance charges. Based on the DP, the charges are levied and are nominal, between INR 300 and INR 900. It considers the value of the transactions made.
The SEBI has issued a Guideline stating that the annual maintenance charges be waived off for small investors if the balance remains less than INR 50,000 and they operate the Basic Services Demat Account (BSDA).
Demat Account Safety Charges/ Custodian Fees
During the traditional trading method, the investors used to store physical certificates, which were paper-based with their DP. Since everything became online, the DP now levies a basic custodian charge depending on the number of securities for the particular Demat account.
Demat Account Transaction Fees
When shares or securities are traded, I.e., bought and sold, the DP charges transaction fees. This fees is a certain percentage of the transaction value. It varies as per the selected brokerage plan. In some cases, a flat fee is charged for the whole month instead of a per-transaction fee.
How to save on the charges?
All the investors keen to lower charges of their trading and Demat accounts can consider the following pointers:
- For part-time or non-active traders, the best option to reduce charges is to opt for a BSDA account.
- Since SEBI has backed investors who cannot make regular investments by introducing this type of account, it is wise.
- In some cases, the annual maintenance charges can be waived entirely off. Therefore, the investor should keep an eye on availing such possibilities as benefits.
- It is to be noted that these types of Demat accounts have a specific holding limit. That is why it would not be suitable for someone looking to make more significant investments.
- Another alternative to save on charges is to opt for discounted brokerage plans.
- Flat fees levied on the account are more suitable than paying charges on regular trades.
- It helps investors save money and encourages them to utilize the same in their investments.
Hence, as an informed investor, it is crucial to pay attention while you open Demat account to ways charges can be minimized by considering the above points.