My Battle with ETrade Over a $25 Fee on a No-Fee IRA

ETrade Paper Statement Fee Strikes!

Back in 2005, I started a Roth IRA with ETrade because they offered a ‘no-fee IRA’ and they had a reputable name. They were my first online broker account. All stock market losses aside, everything had been running smoothly until I noticed something recently. I had a negative cash balance in my account (and I never trade on margin, or borrow from a broker). Of course, I decided to do a little digging.

What I found was that on my December, 2008 statement there was a $25 ‘Annual Custodial Fee’ charged to my account. Being that I signed up for a ‘no-fee IRA’ to avoid these kinds of nickel and dime charges, I was a little upset about this. So I called ETrade and went back and forth with an agent on the phone for about half an hour debating the merits of this $25 fee. His side of the tale, echoed on their website is that:
e-trade fees

There is no annual custodial fee for IRAs if you sign up for and maintain electronic delivery of statements and confirmations. If you choose paper delivery of these documents, you will be subject to a $25 annual custodial fee unless the total assets in your linked E*TRADE Bank and E*TRADE Securities brokerage accounts are $25,000 or more. Other fees may apply. May be subject to change.

Yes, I was receiving paper statements (but only for the last year or so). I had not received a ‘Custodial Fee‘ in each of the previous 3 years. All of a sudden in 2008, I started getting paper statements again. I really didn’t think anything of it and had forgotten the ‘must get electronic delivery’ catch. But why did I start getting paper statements again? I hadn’t re-opted to get them. I also didn’t receive any notification that I’d be getting them again either.

The agent on the phone couldn’t tell me when I opted to receive paper statements again. My thought is that E-Trade periodically updates their users electronic delivery settings – but this is speculative based on my experience.

Twenty minutes of being nice and debating the merits of the fee got me nowhere on the call, so I finally firmed up and said ‘the only way that I’m going to leave this call happy is if you refund the $25 fee, or you can shut down my account right now.”

He did. I’ll give them credit for that. Threatening to leave usually works.

Lessons Learned from the ETrade Custodial Fee Fiasco

  1. Check your cash balances in your accounts periodically to make sure that you are truly getting a ‘no-fee’ account.
  2. If you start receiving paper statements out of the blue, remedy it before you get charged.
  3. Read all the fine print when starting brokerage accounts. ‘No-fee’ is not always as certain as it sounds with all the little catches here and there.
  4. If you do get dinged with fees you didn’t expect, fight them. New customer acquisition is always going to be more expensive for brokerage firms than a frivolous custodial fee. They know that, and if they are smart they will choose not to lose you.

Online Broker Fee Discussion:

  • Have you had similar experiences being dinged on fees that you were not expecting? What did you do?
  • Do you have any positive ‘no fee’ really means no fee stories to share?

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