Revolut adds fee-free share trading: What’s the catch?

Posted: 23 February 2022 12:42 pm
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Revolut now allows investors to buy US shares through its platform. Here's what you need to know.

Global fintech Revolut has hit out at hidden fees for trading customers with its latest offering to the market.

In an announcement, Revolut confirms it is moving into US share trading for its Australian clients.

The UK-based banking service, which specialises in cheap currency and cryptocurrency exchange, points out that the next move will allow its Australian customers the opportunity to buy US shares.

What is it offering?

As part of its offering, Australian Revolut customers will now be able to buy and sell fractional shares listed on the New York Stock Exchange and the NASDAQ through the Revolut app commission-free, for investors who join before 30 June 2022 will gain free trading for the rest of the calendar year.

The company notes it is providing an easier way to get started in the US.

It will offer investors real-time market data, stock charts, price alerts, market graphs and global news all within its app, with trading starting from as little as $1.

CEO of Revolut Australia Matt Baxby said he is excited to offer a simplified trading experience for Aussie investors.

"Traditional providers sting customers with a whole slew of hidden fees including brokerage, markups on foreign exchange into US dollars, as well as deposit and withdrawal fees,” he explains in a statement.

"By offering commission-free trades and our market-leading FX rates, our stock trading feature sets out to simplify things and give investors more money on their trades, and less on fees."

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How much do fees impact earnings?

The maths behind this is pretty simple. Lower fees means an investor takes home more of the profits.

For example, an investor with $2,000 who makes 5 trades which go up 10% over a year, with a custody fee charged of $0.10 p.a. for every $1,000, would get charged $4 in fees for the year.

This means they would take home $196 in profits.

Social trading

Another throw to retail investors is Revolut's social trading.

Investing can be hard for newer investors. After all, knowing what to buy and at what price is challenging at the best of times.

As such, Revolut notes it will include "social trading" features that allow users to share their trading activity and for others to observe their moves.

What is the catch?

While Revolut notes it is attacking consumer fees, it is only for a limited time.

Investors, who sign up with Revolut before 30 June 2022, will receive commission-free trades for the year.

After that customers will still get access to commission-free trades, but there will be a monthly limit which depends on the Revolut plan they're subscribed to. The breakdown is:

  • Standard plan users get 3 commission-free trades per month
  • Premium plan users get 8 commission-free trades per month
  • Metal plan users get unlimited commission-free trades

Once a user on the Standard or Premium plan goes beyond their monthly cap, they will pay a small brokerage fee of $1 per trade thereafter.

Although it's worth highlighting that this fee remains significantly lower than the competition.

Bottom line

Revolut is a cheaper alternative to other providers.

It has the basic features newer investors will need and through the use of social trading can take some of the pressure off them.

However, it doesn't come with all the bells and whistles some of the larger brokers have.

As such, investors will need to decide what they value most. If they just want cheap brokerage or ease of entry point into trading, some advice from this service could help.

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