E*Trade Sells Your Stock To Pay Inactivity Fee

If you’ve bought stocks through E*Trade, make sure you log into your account at least once a quarter. That way you can see if there’s any alerts on the account, like the one telling you about the “inactivity fee” for not executing at least one trade per quarter, the fee that they’ll sell some of your stocks to pay for. This happened to reader Brody, who writes:

I got an email alert today from E*Trade that I’d had some shares of stocks I was holding with the company sold. I didn’t execute the trades and thus I was a bit freaked out that someone else had made them on my behalf.

I called customer service, and they informed me that there is a well-hidden “service fee” for inactivity with E*Trade if you do not make a trade per quarter. Like a good value investor, I was sitting on my stocks and just letting it ride. I asked why I wasn’t given a heads up this fee was going to take place, and I was told the “alert” on my E*Trade account let me know that (even though there was no email sent to me).

Since I have just been sitting on these stocks for a while now, I guess I’ve been charged said fee a couple times; only now did I notice when they decided to liquidate my account to pay for them.

I’ve never liked E*Trade for stock trading. Too much noise and big headlines. I prefer the more bare-bones, no bullshit, Scottrade. As far as I know, they don’t punish people for not needlessly moving money around.

(Photo: ShutterCat7)

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  1. Trevor says:

    They tried the same thing with me, I closed out my account immediately. Etrade customer service is awful, their lag time on transactions is just as bad. I used to be another online brokerage companies customer, until they bought them out. I think I’ll look at Scottrade.

    • nataku8_e30 says:

      @Trevor: Yeah, Scottrade is pretty awesome for barebones trading. They paid a pretty decent interest rate on the cash I just had sitting there, I have never had to pay an erroneous fee, you can transfer money into the account electronically, and every time I have withdrawn money (they will only mail you a check), I always received the check quickly after making the request and there has never been an error.

  2. That might not be allowed. No matter what E*Trade terms of service say.

    Sounds something like “forced redemption of shares.” I don’t think they can sell your stock for owing them account fees.

    But I could be wrong.

  3. lizardking7112 says:

    I had a similar experience with e*trade. They have a $40 dollar service fee every quarter. I had a relatively small amount invested and after a year my balance never went up but the stock did. So I started trying to figure it out why. It is hidden deep within the menus. And was never shown on the main balance page as a deduction. (Because I would have seen that) So unless you were looking for it you would never find it.
    Very Shady, I closed my account that day.

  4. drrew says:

    That happened to me years and years ago, late 90’s maybe. I bought shares in something stupid, I think the United States Basketball League, and then just sat on it, with Etrade eventually liquidating the shares and taking a chunk of the proceeds as fees.

    I’m happy with sharebuilder.

  5. SkokieGuy says:

    Tried to open an IRA account with E-Trade. They screwed up the paperwork and transaction repeatedly and committed security breaches.

    I cancelled the account and am happily with Scottrade.

    • blackmage439 says:

      @SkokieGuy: These are the kinds of stories that [shockingly] do not instill any trust in me with regards to putting my money into an E-Trade account, no matter how decent their rates are.

  6. adamcz says:

    [us.etrade.com]

    It says on their website that they don’t charge inactivity fees. Weird. I have an account at etrade, and may move it if I receive more confirmation that they actually do charge fees.

  7. KRF says:

    I work for a company that requires me to go through pre-clearance every time I want to buy or sell stocks. Once approved, the trade must be executed on the same day.

    How can Etrade just go ahead and do this? My company can’t be the only one that requires this.

    • chiieddy says:

      @KRF: I work for the company that makes the software that monitors employee pre-sales and imports trades. I believe e-Trade is one of the companies that provides feeds for employee trades. They will put the request for sale through the system feed and the pre-sales software will pick it up and allow your management to approve or deny the trade before the sale goes through.

      In addition, there are pre-compliance flags on the account. You probably had to notify your company about all your holding accounts when you joined the firm.

      Some brokerages are incredibly restrictive about employee holdings, to the point where you can only have an account with THEIR firm.

  8. Taed says:

    I also was to get an inactivity fee this quarter, but I was sent an email around 2 weeks ago. I assume the OP does not have their email address set up at E*Trade or it points to an old (inactive) email address.

    I also wouldn’t say that the quarterly service fee for inactive or low-worth accounts (I think it’s at least 1 trade per quarter or $10K of worth) is hidden — I knew about it and it’s listed on their fee schedule.

  9. mugsywwiii says:

    How much was the fee?

  10. chiieddy says:

    I’m also a ScotTrade user. Ben, if you’re going to hawk ScotTrade, you should at least go for the referral free trades ;)

  11. mwshook says:

    Hmm. I’ve had $7 in an E-trade account since 1999. They still mail quarterly statements to my parents’ house. For a while, they would send me these huge prospecti for their money market account. Then they stopped giving me interest.

    A couple of years ago, I tried to close the account, but I didn’t know the password, didn’t know my account number, etc. etc. After 5 minutes on the phone, it was clear the hassle wouldn’t be worth the $7.

    Reading this, I wonder if the money’s still there.

    • bbb111 says:

      @mwshook: “…I’ve had $7 in an E-trade account since 1999…. I wonder if the money’s still there.”

      Unless the rules are different for stock accounts, it should have been turned over to the state as abandoned property. Check the state abandoned property list for E-trade’s home state. [I found my brother’s forgotten utility deposit for him last year when I was checking on an old joint account that I thought might have been left with some money (long story).]

  12. Taed says:

    The fee is $40 and is listed on their web site by going to “Pricing & Rates” and then “View all fees”. It is here: [us.etrade.com]

  13. hills says:

    MassMututal did something similar to me – instead of billing me for my annual fee (so I could pay cash) they sold some of my stock – I was none too pleased.

  14. Necoras says:

    never had any trouble on TD Ameritrade

  15. iMike says:

    Where can I get some of those boxers?

  16. wezelboy says:

    Ameritrade did the same shit with me back in the day. Maybe they’ve changed that policy since then.

  17. chrisjames says:

    I’m losing faith in all those shows about people waking from cryo-preservation to large bank sums from interest accrued. I guess I’ll strike that off my list of get rich (sorta) quick schemes.

  18. savvy999 says:

    eTrade used to have the fee, no doubt about it (I got socked for about $300 worth), but they only took it out if you had a cash balance or when you actually sold a stock.

    It is illegal for them to sell your shares unbeknownst to you.

    The activity fee went away in the past couple of months– I think enough people were jumping ship because of it– you had to either have 3 separate ACH deposits of $1k or more in a quarter (meaning, adding $12k to you account a year– no thanks), OR have a total account balance greater than $10k. Which I did at one time, but after selling of my worthwhile stuff all I had was a bunch of penny stocks in there. Racking up $40 a quarter in fees.

    Haven’t seen the fee again since about May or June of this year.

    • starbreiz says:

      @savvy999: the fee is still listed. a bunch of us decided that we’re going to ask our finance folks for more details, since the company opens an account on our behalf when you receive options. i mean, there’s got to be tons of idle accounts out there when your options are underwater…

    • @savvy999: Their terms of service had language in it that said they could sell your assets to cover the fees. It was introduced as a change to the terms, if I remember correctly. I read it and decided on the spot to take my assets out from there.

  19. diesel54 says:

    I just checked my account…$40 taken out on Sep 24th brining me to -12 in cash for my account. I checked my email and received no warning, just tons of spam of etrade. Thanks for the heads up consumerist. Scottrade, here I come.

  20. YangCaballerial says:

    Best practice when items like this occur it register a complaint directly with the firm or with a securities regulator (FINRA, SEC, and/or state securities regulator). e-Trade may have been within their rights to sell your shares to pay a fee (this is common for short positions) but the complaint will be reviewed. Firms are required to report all complaints to FINRA and they are reviewed individually and in aggregate.

  21. sigsegfalt says:

    You will not be assessed an ASF at the end of the calendar quarter if any of the following apply:

    * Your account is an IRA
    * Your account is a Custodial account
    * Your account has been opened less than 12 months
    * You are a qualified Power E*TRADE customer at the end of the quarter
    * You are a qualified Priority E*TRADE customer at the end of the quarter
    * Your E*TRADE Securities account balance is at least $10,000 at the end of the quarter
    * Your combined balance in linked E*TRADE Securities and E*TRADE Bank accounts is at least $20,000 at the end of the quarter
    * You execute one or more stock or options trades during the quarter
    * You make a minimum of two bill payments using Online Bill Pay during the quarter
    * You make at least three ACH deposits of at least $1,000 each during the quarter
    * You have an E*TRADE Bank Money Market or Money Market Plus Account during the quarter
    * You have an outstanding balance on an E*TRADE Bank VISA card at the end of the quarter
    * You have an outstanding balance on an E*TRADE Bank Home Equity Line of Credit at the end of the quarter
    * You obtained an E*TRADE Mortgage loan within 12 months prior to the end of the quarter
    * You obtained an E*TRADE Consumer Finance Corporation RV or boat loan within 12 months prior to the end of the quarter

  22. This is the reason I also closed up my ETrade account. I did it before they could hit me with that. I racked up $150 in unpaid inactivity fees, but they never started selling off my assets on their own. But the opportunity was definitely there, which is why I took my stuff out.

  23. BigBoat says:

    E*Trade is straight up the devil. I tell everyone who’s thinking about an online brokerage to avoid it at all costs.

    The site I’m interested in right now is Firstrade. Anyone have experience there?

  24. Ein2015 says:

    Could we have a comparison of these sites?

  25. johnfrank says:

    E*Trade did this to me years ago. I had a lot of stock and cash in my account. I kept getting quarterly notices but didn’t even bother to open them (my mistake – never repeated) as it was money I had socked away for retirement. Because I was not trading often enough they charged me $250/quarter for almost a year before I did my taxes and caught it. I closed my account immediately and moved to sharebuilder.com which charges NO annual or manitenance fees. I pass the E*trade bank every day on the 405 as I go to work and I think about what complete crooks they are.

  26. SurekhaWallaby says:

    E*TRADE Trading shouldn’t be used for the poor people as they have fees and high demand:

    You guys should read the FEES&TERMS before signing up at any bank or investment firms. E*TRADE FEES CLEARLY STATES:

    Your account will be reviewed on each quarter’s Activity Record Date and a $40 Account Service Fee (ASF) will be assessed, if applicable, on the Fee Date, which is Wednesday during the last full week of each quarter as indicated below:

    Account Activity
    You execute one or more stock or options trades
    You make a minimum of two bill payments using Online Bill Pay
    You make at least three ACH deposits of at least $1,000 each
    Minimum Balance
    Your E*TRADE Securities account balance is at least $10,000
    Your combined balance in linked E*TRADE Securities and E*TRADE Bank accounts is at least $20,000

    Account Types
    Your account is an IRA
    Your account is a Custodial account
    Your account has been opened less than 12 months
    Other Relationships with E*TRADE FINANCIAL
    You have an E*TRADE Bank Money Market Account
    You have an outstanding balance on an E*TRADE Bank VISA card
    You have an outstanding balance on an E*TRADE Bank Home Equity Line of Credit
    You have an outstanding balance on an E*TRADE Bank Home Equity Installment Loan
    You obtained an E*TRADE Mortgage loan within the prior 12 months
    You are an employee of a current E*TRADE FINANCIAL Corporate Services Employee Stock Plan client

    https://us.etrade.com/e/t/prospectestation/pricing?id=1206010000#AAF

  27. rockstarjoe says:

    DAMN I was wondering where that forty bucks in my account went! Geez this is such a huge waste of money… I wish I had found out about this before all of my stocks tanked. Now I guess I have to wait even longer before I sell them, just to cover this stupid fee. I’m really pissed. Thanks for the tip off everyone!!

  28. chartrule says:

    ouch – you think they would try to get in touch with the customer first

  29. JeromeMabawza says:

    If you have $50k+ in the account, this fee doesn’t apply. And really, if you don’t have $50k in the account, you probably shouldn’t be investing at all.

    Perhaps you should read the fee schedule next time. It’s not hidden and it’s not a secret.

    • diesel54 says:

      @JeromeMabawza: You shouldn’t invest if you don’t have 50k? I got hit with the fee last week. It seemed pretty random to me since it’s been nearly a year and a half of inactivity for me.

  30. P_Smith says:

    As anyone with a minimal amount of knowledge knows, the idea is once you buy stocks, you hang onto them. Why would someone want to log in unless they deliberately intend to buy, sell or trade? This is tantamount to theft.

    There’s only one reason for them to do this: to forcibly make clients pay more fees. It has nothing to do with the best interests of people like the OP. FFS, even a bank won’t rape your basic savings account if you leave it for nine months.

  31. lizardking7112 says:

    No I disagree, the fees are hidden. I only saw the fees through another site I had my account link too. It was through that site I noticed the $40 fees. On E*trades, main page when you log into your account never shows you any deductions for Fee. You have to dig through the tabs to find it and it if it is over I believe 7 days old then it is not listed. You have to run a separate search with a wider date range to view your fees. I my opinion, pretty shady business practices.
    But I will agree this is a service designed for invester with a large sum of money. A person like myself that wants to play the market with a couple of thousand will find no benefit using there services.

  32. NotATool says:

    I think it’s a horrible policy for E*Trade to promote frequent and possibly unnecessary/undesired trading by threatening a fee if you don’t. Investment advisors are always harping about the benefits of buy & hold vs. the evils of day-trading and market timing. E*Trade would seem to be promoting a policy that is antiproductive for the shareholder and kind of annoying to the market in general. Shame on them.

  33. Sugarless says:

    Yes, I had the same experience with E*trade. No notice of sale, no communication, just sold the stock.

  34. virtigo311 says:

    I was hit with the same thing. Had an Employee Stock purchase plan that the company stopped providing thus cancelling their account with E-trade. In doing so I was no longer protected under the “You are an employee of a current E*TRADE FINANCIAL Corporate Services Employee Stock Plan client” Since I hadn’t had any option to purchase more shares, and the stock value hadn’t gone up, there was no need to login to E-trade to check until I saw this post. I also have my account preferences setup to alert me via email (which I never recieved) So I got whacked w/ $80 in fees. I called up and through pleading my case the CSR offered to waive one of the fee’s. Now I need to know how I go about moving my shares to another Fee-free firm.

  35. anamika says:

    Does anyone know if Zecco has a similar fee for keeping an account open without active trading?

  36. jgonzz says:

    This doesn’t sound legal. The NASD would call this a “UT”, unauthorized trade. Contact E-trade’s compliance Department. There is no such thing as giving a bank/brokerage authorization to sell a position to cover a debit or this ‘inactive fee’ nonsense.

    A broker that gets busted with a ‘UT’ would receive at least a $10,000 fine and suspension, perhaps forever.

  37. LavernaEggo says:

    Same happened to me, though not for inactivity. They apparently started charging yearly fees. To cover it, they arbitrarily decided to sell one share of my most expensive stock. I “thanked” them by immediately transferring my account to another brokerage.

  38. 139webster says:

    That’s unheard of. I know they want their money but wow what an unreasonable way of acquiring it. They can really cause someone to lose money just over a few bucks. Imagine you are hit hard and down over 50% and they decide to sell your shares. That’s why I stick with TDAmeritrade :) No gimmicks.

  39. virtigo311 says:

    Just an update to my post, I now have another brokerage that I have an account with in the process of taking controll of my E-trade assets. My firm doesn’t charge a fee, but E-trade is slapping me w/ a $60 charge to release control. Bastards. I figure the $60 to get away is cheaper than $40/quarter in erroneous fees. Here is one person that will never, EVER deal with E-trade again.

  40. BusinessHut says:

    I have to disagree with most of the disgruntled commenters. I’ve been with E-Trade for about 5 years and I’m very happy with their service. The fees are easily found if you take the time to look. Also, a few days, or even weeks sometimes, they send an email alert if I’m about to be charged a fee. I got an email about the $40 no activity fee, so I sold a bit of stock before the deadline and only spent $12 to avoid the $40 fee.

    Actually, I was about to incur a $10 low balance fee on my e-trade checking account, so I entered a question into their automated system. Within an hour or so, someone called me about it. She happily transferred my money from checking to my brokerage acct and closed the checking account.

    It might not be popular to say on this post, but I’m very happy with E-Trade and their customer service.

    • Anonymous says:

      I cannot disagree more. E-Trade consumed my entire account to pay inactivity fees. Then, to add insult to injury, my tax accountant informed me I owe capital gains tax on the sale of the stock! When I complained, E-trade said that “company policy” prevented them from refunding even a penny of MY MONEY. It’s is unacceptable to force people to “churn” their accounts just to avoid an inactivity fee. There are plenty of other options available. Please, please, do not use E-Trade.

  41. Robert Grout says:

    If you’ve been taken by etrade you can find out what you can do at this web site; [www.etradesoldmystocksandkeptthemoney.com] They sold ALL of my stock with out warning to pay for maintenance fees and said it was my fault I hadn’t had any activity in awhile. I cant believe the horrible customer service e trade has, I used to own a business and I would never treat my customers like that.