When you plan to start investing in the stock market, the first thing you need to do is open a demat account. Why, you ask? Well, a demat account helps you store all your securities safely in one place.
That, too, is in an electronic form, meaning it eliminates the hassle of storing and safekeeping of physical certificates. There are several benefits of demat accounts including convenience, accessibility, etc, and therefore, it also has opening, maintenance, and other charges involved.
As an investor, it is important to understand and be aware of these charges. The Demat account fee is typically minimal; however, being aware of them helps you make the best financial charges. Continue reading as we explore several types of demat account charges and how to reduce them for better returns.
Types of Demat Account Charges
Here are some common charges of demat account you need to know.Â
1. Demat Account Opening Fee
To open a demat account, you need a DP or depository participant. These DPs can simply be understood as brokers or banks allowing you to open a demat account. Now, opening this account requires a fee called an opening charge. The opening fee may vary from one broker to another. Compare these charges and choose the best one without compromising the quality.
Tip: Some brokerage firms also help you open a Demat account with zero fees. You can benefit from this feature, especially if you are just starting.
2. Demat Account Maintenance Fee
Another prominent demat charge is the maintenance fee. The maintenance charges are calculated annually and generally range between ₹300 to ₹300. Remember, some brokers also offer zero account maintenance charges that can help you boost your returns.
3. Demat Account Transaction Fee
A certain fee is charged called a transaction charge whenever you buy or sell securities from your demat account. These transaction charges vary based on several factors. This means transactional charges may differ from one DP to another based on your brokerage plan or even on the frequency and value of your transactions.
4. Demat Account Custodian Fee
Before demat accounts came into the picture, traders used to store physical certificates on their own. The responsibility for the storage and the security of these investments was on the shoulders of the traders themselves.
However, with the introduction of demat account charges, it is now the DPs who have to keep these investments safe. A custodian charge is levied for the same to safe-keep all your digital certificates.
5. Miscellaneous Charges
In addition to these expenses, there are some miscellaneous charges that you need to be aware of. This includes costs of stamp duties, courier fees, and more.
Top Tips to Reduce Your Demat Charges
As an investor, it is obvious that you would want to increase your returns and reduce these charges to earn better profits. Well here are some effective tips that may help you reduce extra demat charges:
1. Choose a BSDA Account
For small investors or investors who are not frequent in their trading practices, you may consider choosing a BSDA or Basic Services Demat Account. One of the prominent benefits of opening such accounts is that your annual maintenance charges are waived.
However, you must know that these accounts have a holding limit of up to ₹2,00,000.
2. Look for Zero AMC Demat Accounts
Another effective way to reduce your demand charges is to look for brokerage firms that offer zero account maintenance charges and demat accounts. Here, you need not pay any maintenance charges, and the saved fee can be used to lock in better trading opportunities.
3. Consider Looking for Discount Brokerage Plans
If you’re a frequent trader, you may also consider looking for discount brokerage plans. These plans allow you to trade at a flat charge irrespective of your trading frequency.
Thus, you may trade all you want without worrying about transactional charges. However, make sure to do a thorough research and then choose an ideal plan for yourself.
Bottom Line
Technology has changed the investment landscape in many ways. The introduction of demat accounts has helped investors in terms of storage of their securities and their safety and offers better accessibility and convenience.Â
However, to make most of these demat accounts, you need to be careful of even small charges associated. Consider comparing these charges and look for suitable ways to reduce them, and with simple tips like these, you can significantly improve your earnings.
