How Does ETRADE Make Money in 2023?

How Does ETRADE Make Money?

E*TRADE is an online brokerage firm, owned by Morgan Stanley, that allows customers to buy and sell stocks, bonds, mutual funds, ETFs (exchange traded funds), futures contracts and other securities.

As a result of its services being in demand by investors, E*TRADE makes money from commissions on trades as well as interest earned on the cash balances held by its customers. The company also earns revenue through margin lending and fees charged for additional services such as retirement accounts, investment advice or access to research reports.

Overall, E*TRADE's business model has been successful in generating profits since it was founded in 1982. So just how does ETRADE make money?

Read on find out more how much money ETRADE makes, and an analysis of the ETRADE business model!

Overview of E*TRADE and its services:

etrade mobile


E*Trade is an online stock brokerage firm that allows users to buy and sell stocks, mutual funds, ETFs, and other investments.

The company was founded in 1982 and has since become one of the largest online brokers in the world, pulling in $2-3bn in revenue yearly.

Types of Services Offered by E*TRADE

E*Trade offers a wide range of services such as trading platforms for desktop and mobile devices, banking services including checking accounts, savings accounts, credit cards, loans and more. They also offer research tools like market data analysis and financial advice from experts.

With E*Trade’s user-friendly interface and competitive fees structure it has become a popular choice among investors looking to manage their own portfolios or trade on the go.

Benefits of Using E*TRADE

The platform offers a range of services, from trading stocks to portfolio management, providing ample opportunities for users to get the most out of their investments.

One of the greatest benefits of using E*Trade is  its low fees. The platform charges a flat-rate commission on all trades, meaning you know exactly what to expect prior to investing.

E*Trade also has an impressive range of tools and resources, from live market data to educational content like webinars and courses.

This makes the platform suitable for both novice and experienced traders, giving everyone an equal chances to compete in the markets.

How to Open an Account with E*TRADE

a screenshot of the etrade platform

Opening an account with E*TRADE is quite straightforward and can be completed online in just a few simple steps:

  • To start, you'll first need to create an account on the website, selecting the type of account you would like to open.
  • After selecting your desired account type, you will be prompted to provide personal information such as your name, address, and contact information.
  • After your profile is created, you will be prompted to make a deposit into your new account. This can be done with a debit card, credit card, or bank transfer from checking accounts.

Once the funds are deposited into the account, you'll be ready to start trading!

Fees and Costs Associated with Trading on the Platform  

When trading with E*TRADE, there are several fees and costs associated with each transaction. The most common fee is the flat-rate commission charged on all trades.

This fee can range from $0 to $6 depending on the type of transaction, such as stocks, options, or ETFs. Additionally, some trades may incur additional fees, such as margin loan interest or an annual account fee.  

E*TRADE also charges service charges for certain accounts, such as retirement or education accounts. This fee can range from $25 to $50 per year. E*TRADE does offer some cost savings when making multiple trades in one day and has discounted commissions or even commission free trading for frequent or institutional investors. So if you're looking to save money on trading costs, be sure to take advantage of these offers.

Finally, don't forget about all the other costs involved in investing such as data fees, taxes, and research fees.

These can add up quickly if you're not careful! So make sure to do your due diligence and fully understand what fees and service charges may be incurred before placing any trades on your brokerage account or retirement account.

How E*TRADE Makes Money from Commissions on Trades

etrade revenue from comissions

So, how does ETRADE make money? One of the primary sources of income for E*TRADE is commissions on trades and investment services.

They offer a wide range of commission rates depending on the type of customer and the investment products being traded. For example, customers who are actively trading stocks and options will be charged higher per-trade commissions compared to those that primarily trade mutual funds.

To help investors keep their trading costs in check, E*TRADE has a commission free trading program which allows retail investors to buy and sell over 100 ETFs without worrying about paying commissions.

This makes it easier to diversify your investments without incurring any additional costs. Aside from commissions, there are other fees that customers may have to pay such as account maintenance fees and margin interest.  

However, these fees are generally quite reasonable and should not deter customers from using E*TRADE to manage their investments. When it comes to fees, E*TRADE is an excellent and affordable choice for investors. While some brokerages charge high commissions on trades, E*TRADE offers competitive fees that are among the lowest in the industry.

E*TRADE charges a flat rate of $6.95 per stock or ETF trade. For mutual funds, they charge $19.95 per trade and $0 for no-load funds. They also offer commission-free options trading with no base fees and a per contract fee of just $0.65.

With just over 5.2 million users on E*TRADE, you can see how that adds up!

Interest Earned on Cash Balances Held by Customers

etrade revenue from interest

E*TRADE, the online investment and trading platform, makes money when customers hold cash balances in their brokerage accounts. How does ETRADE make money on cash balances you ask?

This is because E*TRADE earns interest income on these cash holdings. The amount of interest income earned will depend on the prevailing market rates, which can vary depending on the country or region where E*TRADE operates and the type of currency held in the money market accounts.

Generally speaking, most major currencies – such as US dollars,  euros and pounds – offer a higher return than smaller or more exotic currencies.

Banks also earn money from interest earned on cash balances held by customers in their bank account. Just like E*TRADE, the amount of interest earned will vary according to the prevailing market rates and the type of currency being held in the account.

E*TRADE's interest-earning cash balances contribute significantly to its overall revenues. This is mainly due to the fact that customers typically have a large amount of money stored in their accounts, and as market rates rise, so too does the amount of interest earned from these holdings.

As an example, when E*TRADE operates in countries with higher market rates, the amount of interest earned is likely to be greater than in countries with lower market rates.

In short, E*TRADE makes money when customers keep their cash in their accounts, just like your bank account – so why not give them an incentive to do just that? After all, everyone loves a financial reward!

Revenue Generated Through Margin Lending

etrade lending margin

One of the ways in which E*TRADE generates revenue is through margin lending. Through this process, clients are able to borrow funds from E*TRADE in order to purchase securities or invest in other products.

This type of lending is beneficial for both E*TRADE and its clients, as it allows the company to collect interest on the loan and provides customers with additional capital to invest.

However, margin lending also carries with it some risk as borrowers are required to pay back the loan plus any accrued interest.

E*TRADE’s margin lending operates in a way that is beneficial to both the company and its customers.

Through this method of lending, E*TRADE is able to collect interest on the loans it provides on futures and money market funds, which contributes significantly to its revenue.

The clients who opt for borrowing funds from E*TRADE can use the money to purchase securities or invest in other products of their choice, giving them access to capital they may not have had otherwise.

So while margin lending could potentially be a lucrative endeavor for both parties involved, it’s important to understand the risks associated with this type of loan.

Borrowers are required to pay back the full amount, plus any accrued interest, so it’s essential to carefully consider the potential returns and costs of engaging in margin lending before taking the leap.

Fortunately, E*TRADE is here to provide customers with resources and guidance when it comes to navigating the margin lending process.

Fees Charged for Additional Services

etrade offices

So - how does ETRADE make money by charging fees for extra services outside of its' usual remit?

The company has a wide range of fees for additional services that it provides, including those related to trading activities, account maintenance, and research:

Per-trade commission

One of the fees charged by E*TRADE is the per-trade commission. This fee applies to each trade you make and depends on the type of asset you’re trading. While this fee might seem like a small cost, it can really add up for a lot of active traders.

E*TRADE's per-trade commission fee contributes to the company's revenue in a major way, given its 5.2 million users. This fee is charged for each and every trade made by investors and traders, regardless of how much they buy or sell. This fee can be either a flat rate or a percentage of the value of the trade.

Account maintenance fee

E*TRADE also charges an account maintenance fee, or account management fee, which helps to cover the costs associated with processing and maintaining your trading account and debit balance.

This fee is charged on a quarterly basis and varies based on the type of account you hold.

Additional services fee

The company also offers additional services for an additional fee, like research tools and access to advanced trading platforms.

Some of these services may cost more than you’re willing to pay, so it pays to shop around and compare fees before committing to a plan.

Overall Success of E*TRADE Since its Founding in 1982

a knight with etrade logo

E*TRADE has achieved significant success since its founding in 1982, growing to become one of the most successful online stock trading companies with over 5.2 million users worldwide and a net income of $2.8 billion in 2019.

It's no surprise that E*TRADE has become a household name in the online trading world. With its cutting-edge technology, user-friendly interface, and extensive research capabilities, it's easy to see why so many people rely on E*TRADE to manage their investments.

With its mobile app, you don't even have to be at your desk to get in on the action.

Over the past decade, E*TRADE has experienced a surge in users and revenue, and this trend is expected to continue well into the next decade.

With its innovative technology, user-friendly interface, and extensive research capabilities, E*TRADE is well-positioned for extended growth.

As more people become comfortable trading stocks online, E*TRADE is sure to benefit from this shift in investor habits.

It's no wonder that the company continues to be a favorite among savvy investors.

Hopefully that explains the ways that E TRADE make money!

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