Bank of America Corp., escalating a raging price war as banks and brokerage firms battle for online stock-trading customers, plans to offer as many as 30 free trades a month to millions of customers with at least $25,000 in deposits.
nationwide eligibility by February 2007.
the complete Wall Street Journal article is linked below (subscription may be needed):
30 equity orders: stocks & ETFs. (penny stocks ok) Mutual funds are not free. Limit orders & GTC orders are included. There is NO trailing stop order feature. (A real bummer if you like to set your trades on auto-pilot.)
Message edited by: thinwalletnow on 2007-05-13 22:31:27 CDT
As of 10/11/2006, offer available in CT, DE, MA, ME, NH, NJ, NY, PA, RI, and VT only, and does not apply to Custodial Accounts, Business/Corporate Accounts, Investment Club and Partnership Accounts held at BAI.
So this offer is only for people in thoses states right now.
Important distinction in the fine print...the $25k balance requirement must be maintained in your banking accounts, not in your brokerage accounts. If you routinely park that kind of cash in your BofA accounts, it is no big deal, but I think the distinction is going to be lost on most people at first glance.A combined balance of $25,000 or more across any of your Bank of America, N.A. deposit accounts (including checking, savings, and CDs).
dcwilbur said:Important distinction in the fine print...the $25k balance requirement must be maintained in your banking accounts, not in your brokerage accounts. If you routinely park that kind of cash in your BofA accounts, it is no big deal, but I think the distinction is going to be lost on most people at first glance.A combined balance of $25,000 or more across any of your Bank of America, N.A. deposit accounts (including checking, savings, and CDs).I agree that this could be a little confusing for some, but I'd hardly call it "fine print", it's the second point in a bullet list of two points right there in the main text.
Beckles said:I agree that this could be a little confusing for some, but I'd hardly call it "fine print", it's the second point in a bullet list of two points right there in the main text.And how many people really know that when they open an account with Banc of America Investment Services, Inc., that it isn't the same as Bank of America, N.A? Even the wording they use in that bullet, "including checking, savings, and CDs," is misleading, since that really is the ONLY kind of balances you would have at Bank of America, N.A.
C'mon, didn't you read it at first glance as saying, "Wow, transfer $25k to BofA and get free trades?"
dcwilbur said:Beckles said:I agree that this could be a little confusing for some, but I'd hardly call it "fine print", it's the second point in a bullet list of two points right there in the main text.And how many people really know that when they open an account with Banc of America Investment Services, Inc., that it isn't the same as Bank of America, N.A? Even the wording they use in that bullet, "including checking, savings, and CDs," is misleading, since that really is the ONLY kind of balances you would have at Bank of America, N.A.
C'mon, didn't you read it at first glance as saying, "Wow, transfer $25k to BofA and get free trades?"Not once I read the two bullet points right in the main text ...
A self-directed brokerage account with Banc of America Investment Services, Inc.
A combined balance of $25,000 or more across any of your Bank of America, N.A. deposit accounts (including checking, savings, and CDs)
As I said, I would agree it may be confusing to some, but I don't see how anyone could claim it's in the fine print. The "including" is not as confusing as you make it seem when it is taken in context with the rest of the text it actually appears with.
Assumptions: Value of a trade: $7 (Scottrade) Opportunity cost of lost interest: 5.05% (EmigrantDirect rate)
If you're going to actually make 25 trades/mo, this is exceedingly hot. Otherwise, not so much. That 25k would earn you about $1262.50 in interest that year. Compare that to the value of the 360 (30x12) trades annually, which is $2520. This is the equivalent of 10.08% interest, and the value of the free trades probably is not taxable, whereas the money in a savings account would be, increasing the real value even more. At a 20% tax bracket, this is the equivalent of 12.6%.
If, however, you are not going to make 30 trades/month, you would need to average 180.35 trades/yr (about 15/month) to break even. Assuming the 20% tax bracket, the real earnings on the $1262.50 would be $1010. This would mean you would need to make 144.28 trades/yr (about 12/month). I would bet that most people do not trade this much.
This analysis leads me to conclude that this deal is hot for daytraders, but not for others.
dcwilbur said:And how many people really know that when they open an account with Banc of America Investment Services, Inc., that it isn't the same as Bank of America, N.A? Even the wording they use in that bullet, "including checking, savings, and CDs," is misleading, since that really is the ONLY kind of balances you would have at Bank of America, N.A.
C'mon, didn't you read it at first glance as saying, "Wow, transfer $25k to BofA and get free trades?"
LOL by law banks cant be brokers. So the way they get around it is to have subsidiaries own the brokerage service and link it to the checking account.
Citibank - brokerage unit is called Citibank Investment Services
Wells Fargo- brokerage unit is called Wells Fargo Investments and has this disclaimer on there web page: "Investment products and brokerage services are available through Wells Fargo Investments, LLC (member SIPC), a non-bank affiliate of Wells Fargo & Company"
WAMU brokerage unit is called WM Financial Services, Inc. and WAMU has this big disclaimer on there web page "WM Financial Services, Inc. is an affiliate of Washington Mutual, Inc., and its banking subsidaries, and is a member of the NASD/SIPC."
So not sure what your problem with BOA's brokerage unit it is basically the same way as all other banks. You can transfer funds back and forth instantly etc. It not like you need to send money out via ACH or anything.
Another thing as far as Wells Fargo, BOA and Citibank you select you checking account to be your seatlement account so all money is paid and withdrawn from your checking account to seatle all brokerage trades atleast in Cali you can because this is how my accounts are set up their.
HKnight said:Assumptions: Value of a trade: $7 (Scottrade) Opportunity cost of lost interest: 5.05% (EmigrantDirect rate)
If you're going to actually make 25 trades/mo, this is exceedingly hot. Otherwise, not so much. That 25k would earn you about $1262.50 in interest that year. Compare that to the value of the 360 (30x12) trades annually, which is $2520. This is the equivalent of 10.08% interest, and the value of the free trades probably is not taxable, whereas the money in a savings account would be, increasing the real value even more. At a 20% tax bracket, this is the equivalent of 12.6%.
If, however, you are not going to make 30 trades/month, you would need to average 180.35 trades/yr (about 15/month) to break even. Assuming the 20% tax bracket, the real earnings on the $1262.50 would be $1010. This would mean you would need to make 144.28 trades/yr (about 12/month). I would bet that most people do not trade this much.
This analysis leads me to conclude that this deal is hot for daytraders, but not for others. If the money is going to be in savings, then you can open an AAA or NEA money market at 5.11% APY for balances 10k-50k (not including the NEA promo rate), so if you are keeping the money in ED, you are actually better off.
dolmar said:So not sure what your problem with BOA's brokerage unit it is basically the same way as all other banks. You can transfer funds back and forth instantly etc. It not like you need to send money out via ACH or anything.Geez, guys. You are blowing this all out of proportion. All that I was pointing out was that in order to get the free trades in your brokerage account, you also need to maintain a $25,000 balance in your deposit accounts!
I certainly know that banks can't be brokers and that funds in brokerage accounts aren't FDIC insured and that all the major players get around this with affiliates and subsidiaries and holding companies and such. I also know that this distinction is lost on a fair portion of the general public. Now can we get over this point?
Xeon852 said:HKnight said:Assumptions: Value of a trade: $7 (Scottrade) Opportunity cost of lost interest: 5.05% (EmigrantDirect rate)
If you're going to actually make 25 trades/mo, this is exceedingly hot. Otherwise, not so much. That 25k would earn you about $1262.50 in interest that year. Compare that to the value of the 360 (30x12) trades annually, which is $2520. This is the equivalent of 10.08% interest, and the value of the free trades probably is not taxable, whereas the money in a savings account would be, increasing the real value even more. At a 20% tax bracket, this is the equivalent of 12.6%.
If, however, you are not going to make 30 trades/month, you would need to average 180.35 trades/yr (about 15/month) to break even. Assuming the 20% tax bracket, the real earnings on the $1262.50 would be $1010. This would mean you would need to make 144.28 trades/yr (about 12/month). I would bet that most people do not trade this much.
This analysis leads me to conclude that this deal is hot for daytraders, but not for others. If the money is going to be in savings, then you can open an AAA or NEA money market at 5.11% APY for balances 10k-50k (not including the NEA promo rate), so if you are keeping the money in ED, you are actually better off.
You can also buy one of BOA Liquid CD which currently pays 5% in cali and allows 1 withdrawal durning the year as long as you maintain $5K min. So differnce between interest lost from Savings account to BOA is not a huge amount it really only $250 a year compared to highest yeilding 1 year CD and they dont allow 1X no penilty withdrawal. Also like Xeon852 said AAA/NEA MMA pays a higher rate than ED/Citi/HSBC/WAMU and many other online savings accounts except a few.So the CD would work if BOA reduced the rate on these accounts otherwise thses MMA account out preform BOA liquid CD anyways.
Thanks OP! I have been thinking about renting a safe deposit box from BOA but hesitated to deposit a larger amount for a free one. Was going to just pay for it. The recent 5+% MMA was tempting but I didn't pull the trigger, and now this!
It'd be interesting to see how other brokage firms react, especially eTrade.
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