Interactive Brokers (IBKR) fees explained and simplified

Interactive Brokers offers access to more than 150 global markets, but with that comes a dizzying array of fees and commissions to get your head around.

So if you open a stocks and shares ISA with Interactive Brokers, what are the potential charges you need to know about?

Here's your cut-out-and-keep guide of what to expect.

Account fees

There's no annual charge for a stocks & shares ISA with IBKR (also known as IBUK). However, there is a minimum monthly activity fee of £3.

This basically means that you need to generate at least £3 of commission for Interactive Brokers every 30 days, based on the trades you perform.

If your trades generate £1.50 in commission, you'll only pay the remaining £1.50 as a charge.

And if you've already paid over £3 in commission during this period, there are no additional account fees to pay.

This fee isn't particularly large but it does mean that Interactive Brokers might not be the best choice if you're a passive investor who wants to set up a portfolio and leave it untouched.

This also applies to those that aren't investing large amounts – if you're only investing £50 or £100 per month, you're effectively paying 3-6% in account fees which is high compared to other brokers.

Withdrawal fees

IBKR allows ISA customers to make one free withdrawal every month. Any additional transactions come with a £7 fee attached.

Trading fees

Through an IBKR ISA, you're able to invest in stocks, shares and funds.

But the fees you'll pay depend on several factors, including:

• The type of asset you're investing in
• The market where shares are traded
• How many shares you're buying

And this is where things can start to get confusing for people – one glance at IBKR's fees page and it can be overwhelming for any investor.

So, let's simplify things:

Typically, it costs £3 per trade for British stocks and ETFs, and €3 for most European stocks.

This assumes you're using a feature called IB SmartRouting, which basically scours multiple exchanges for the best available prices.

Just to stress, this is a charge on the overall transaction – not per share.

Let's imagine you're buying 300 shares in a company on the FTSE 100 that cost £2 each. The total value of the investment would be £600, with a £3 commission added on top. If you were to buy just one share, at £2, the fee would still stand at £3.

One exception is if you're making a single trade that's above £6,000 in value. Here, the £3 fee is replaced by commission of 0.05%. As an example, investing £10,000 in a single stock would incur a charge of £5.

Things get a little bit more complicated if you're snapping up American stocks.

If you're buying full shares, you're going to pay a minimum of $1 or a maximum of 1% of the trade's value, whichever is higher.

Say you're buying one share in Intel that's worth $30. A 1% cut of this would come to just $0.30, so the minimum of $1 would apply.

Now let's assume you want 10 shares of Intel, at a total cost of $300. You'd pay 1% as commission, meaning the fee comes to $3.

Another snag for British users relates to foreign exchange fees – in other words, converting your pounds into dollars. That comes in at a minimum of $2 extra.

Minimum fees are lower for fractional shares. As the name suggests, this relates to when you're only buying part of a stock – and comes especially in handy if you want exposure to companies with astronomical share prices. Here, the minimum falls to $0.01 per trade.

See how IBKR stacks up against other brokers in just a few clicks with our broker comparison tool.

Buying funds

Interactive Brokers offers more than 50,000 mutual funds from around the world – and thousands of them come with no transaction fees attached.

Other funds typically command a flat, all-in €4.95 charge that covers all of the costs associated with the trade.

If you're buying funds, you would still be required to pay the £3 minimum monthly commission, in addition to any flat fund fees where applicable.

The verdict

Getting your head around the many, many fees charged by Interactive Brokers can be overwhelming (trust us: we're seeing double after writing this guide).

There's a few factors at play here.

For one, Interactive Brokers has long positioned itself as an advanced platform for traders, and its foray into stocks and shares ISAs is fairly recent.

IBUK also argues that carefully itemising its fees is more transparent than other brokers who claim they offer "zero commission" when hidden costs are attached – and says its platform can deliver significant savings when compared with rivals.

As ever, it's worth doing your research and weighing up the costs before taking the plunge with an ISA provider.

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