How to Reduce Demat Charges? Tips to Save Money on Trading Fees
The stock market is not accessible to anyone without a Demat account in which you safely keep your shares by electronic means. So, even if you have a Demat account, it goes without saying that various charges like account opening fees, annual maintenance charges (AMC), transaction fees, and brokerage charges might swallow the profit you are going to have from your trades.
In this blog, we will explore how to reduce Demat charges and share practical tips to help you save money on trading fees.
Understanding Demat Charges
In order to reduce costs you will need to know the common Demat charges that are levied by brokers and depository participants (DPs). Here are some key fees associated with a Demat account:
1. Account Opening Charges
While some brokerage firms levy a start-up fee for the opening of a Demat account, others do it free of charge or for free when they are running a promotion.
2. Annual Maintenance Charges (AMC)
Annual maintenance charges (AMCs) are the fees that the brokers deduct for maintaining a Demat account, it is necessary to pay this fee. This charge differs according to the broker and it can reach up to ₹1,000 per year charged by some full-service brokers.
3. Transaction Charges
Every time you buy or sell stocks, the depository or broker may charge a fee per transaction. These charges can vary based on the volume of shares traded.
4. Brokerage Charges
Brokerage fees are one of the most significant costs associated with trading. Some brokers charge a percentage of the trade value, while discount brokers offer flat-rate fees.
5. Other Charges
Custodian Fees: Charged for the safekeeping of securities.
Debit Transaction Charges: Applied when you sell shares.
Pledge Charges: Levied when you pledge shares as collateral for a loan or margin trading.
Tips to Reduce Demat Charges and Save Money
Now that you understand the different charges, let’s explore practical ways to minimize them.
1. Choose a Discount Broker
Traditional full-service brokers charge property companies in a very hard way. While at the same time, discount brokers such as Pocketful, Zerodha, Upstox as well as Angel One would offer the buyer much lower typing costs, which can even be free on delivery transactions. If a person were to Select a discount broker then one can actually save quite a substantial amount of money on the expenditures for trading.
2. Look for Zero AMC Demat Accounts
Many brokers offer zero AMC Demat accounts as a promotional offer. If you are an infrequent trader, consider choosing a broker with no AMC or one that provides a lifetime free Demat account.
3. Opt for a Broker with Free Delivery Trades
Several discount brokers offer zero brokerage on delivery trades, meaning you don’t pay any charges when buying stocks for long-term investment. Pocketful, for example, provides free delivery trading, helping you save money.
4. Minimize Your Transactions
Transaction charges are applied each time you trade. To reduce costs:
Avoid unnecessary buying and selling.
Consider investing for the long term instead of frequent short-term trading.
Use a Systematic Investment Plan (SIP) for stocks instead of bulk purchases.
5. Avoid Unnecessary Pledging of Shares
If you don’t need margin trading, avoid pledging your shares as collateral, as brokers charge pledge and pledge fees. Instead, use cash for trading whenever possible.
6. Consolidate Your Holdings
Having multiple Demat accounts can lead to higher liability of various AMCs. If you have several accounts, you might as well buy, and talk to a bank that you know is offering low rates when you consolidate your investments into a single Demat account. This will save you maintenance money.
7. Monitor Hidden Charges
It is an act of some brokers to impose extra payments such as default DP charges, auto-square off fees and call and trade charges. Do ensure you have read the fee structure carefully and ask your broker about all applicable charges before you open an account.
8. Use UPI or Net Banking for Fund Transfers
Depositing and withdrawing funds through UPI or Net Banking is usually free, while some brokers charge for using other payment modes like debit or credit cards.
9. Avoid Low-Liquidity Penny Stocks
Trading in low-volume or illiquid stocks can lead to higher bid-ask spreads, causing additional costs due to price fluctuations. Stick to highly liquid stocks to reduce potential losses.
10. Regularly Review Your Broker’s Charges
Brokers could possibly change their fee structure as time goes by. Watch out for any of the differences and compare brokers to make sure that you are getting the best value. When you see a broker who offers lower charges, you may consider making a change.
Comparison of Demat Charges Across Popular Brokers
Here’s a quick comparison of Demat charges across some of the top brokers in India:
| Broker | Account Opening Charges | AMC Fees | Brokerage (Delivery) | Brokerage (Intraday) |
|---|---|---|---|---|
| Pocketful | ₹0 | ₹0 | ₹0 | Flat ₹20 per trade |
| Zerodha | ₹200 | ₹300 | ₹0 | Flat ₹20 per trade |
| Upstox | ₹0 | ₹150 | ₹0 | Flat ₹20 per trade |
| Angel One | ₹0 | ₹240 | ₹0 | Flat ₹20 per trade |
Note: Charges may vary. Always check the latest charges on the broker’s website before opening an account.
Conclusion
Evening out Demat charges are of very great importance in getting the most out of your investments in the stock market. In other words, being a little bit extra careful on your side, you can be sure to get yourself some more money in your trading. Thus, picking a discount broker, going for a flat AMC account, keeping your transactions such the ones that are not compulsory on a minimum basis, and making sure that there are no hidden fees can put down your trading costs to a large extent.
Want to start trading with zero brokerage? Open a free Demat account with Pocketful today and save on trading fees!
FAQs
1. How can I avoid paying high Demat account charges?
Choose a discount broker with zero AMC and free delivery trading, and avoid unnecessary transactions.
2. Can I have multiple Demat accounts to save on charges?
Yes, but multiple accounts may increase AMC fees. Consolidating into a single low-cost broker account is a better option.
3. Do all brokers charge brokerage fees?
No, many brokers, such as Pocketful and Zerodha, offer zero brokerage on delivery trades.
4. What is the cheapest way to invest in stocks?
The cheapest way is to use a discount broker with zero AMC and free delivery trading, invest for the long term, and avoid unnecessary transactions.
5. Is a Demat account required for investing in mutual funds?
No, mutual funds can be invested in directly through fund houses without a Demat account, but having one provides better portfolio tracking.
