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Don’t Ignore These Demat Account Charges When Choosing A Demat Account

Stock markets can be hugely rewarding if you know the basic rules of the game, i.e. when to buy and when to sell. Share trading is one of the preferred means to boost your current income and also grow your wealth. To ensure success in share trading, one of the first things you will need is a demat account. If you are new to this domain and wondering what is demat account, it’s simply a digital record of all your investments such as equity shares, mutual funds, debt securities, bonds, ETFs, government securities, etc. A demat account (dematerialized account) enables seamless and fast buy/sell transactions, eliminates paperwork and leaves little room for human error.

To choose the right demat account, you need to consider various factors, one of which is demat account charges. These are the charges that you will be paying towards opening and maintaining your demat and share trading account. You should not ignore these charges, as these can erode the profits that you make via your stock market investments. Here are some key demat account charges that you need to check before opening your demat account.

Account opening fee: This is a one-time fee that you need to pay when you open a demat account. Most full-service stockbrokers charge demat account opening fee and it varies from broker to broker. However, special offers are launched regularly wherein you can open a demat account for free.

Annual maintenance charges (AMC): This is essentially a fixed charge that is used for maintaining the demat account. This fee is charged by depository participants (DP) on an annual basis. You will have to pay AMC irrespective of the volume of transactions in your share trading account. However, if there’s a special scheme for new customers, you can have the AMC waived off for the first year.

Brokerage charges: These are probably the most important, as these will directly impact the profits you earn from share trading. These charges are levied on a percentage basis on all buy/sell transactions. Based on the volume of transactions, you can choose either variable brokerage plan or flat brokerage plan. You can probably call customer care of the respective DP to understand which brokerage plan will be most suitable for you.

Dematerialization of share certificates: Dematerialization is the process of converting physical (paper-based) share certificates into digital form. You will be charged a fee every time you do this. The dematerialization fee charged by most DPs is usually a flat fee per share certificate. However, there may be other DPs who may charge dematerialization fee as a percentage of the total value of shares. The flat fee system usually works out cheaper, as compared to the one based on total value of shares.

Rematerialization of share certificates: Based on your needs, you can get your shares in electronic form converted back to paper form. This process is called rematerialization. Applicable fee will be charged by your DP for rematerialization of share certificates.

Destatementization and restatementization: Destatementization is the process of converting physical mutual fund units into electronic form. The opposite of this is restatementization where you convert your digitally-held mutual fund units into physical form. You need to pay applicable fee for both destatementization and restatementization.

Redemption charges: Redemption is the process of selling your mutual funds at market rates. The proceeds are credited to your demat account/ bank account. Usually, you need to pay a flat fee for each redemption request.

Postal charges: In case you need to get your documents and account statements delivered to your address, you will be required to pay applicable postal charges.

Do read the fine print to ensure that there are no hidden charges. In addition to demat account charges, you also need to consider other factors such as ease of account opening, features offered in the share trading account, and value-added services such as research-based stock recommendations, analytics, and reports. Overall, the best demat account will be one that has a user-friendly interface, allows quick and bug-free share trading, is not expensive to use, and regularly boosts your knowledge with critical market insights.

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