Save $5,000 a year on sneaky fees

Lance Cashion saved $3,200 in commissions over the past year by using a broker that's in sync with his investing strategy. Cashion, a 33-year-old technology executive at an insurance firm, frequently trades stocks and options. But the fees at TD Ameritrade "were killing me," he says. TD Ameritrade charges $9.99 per online stock trade and $9.99 for an options trade plus 75 cents per contract.

So last year Cashion made the switch to Zecco Trading, which offers 10 free stock trades per month on accounts with $2,500 or more and charges $4.50 per stock trade thereafter. For options, Zecco charges $4.50 per online trade plus 50 cents per contract. "I'm going to go wherever the free trades are," says Cashion, who lives in Fort Worth, Texas.

But commissions aren't everything. Cashion and his wife, Kathryn, keep their retirement assets with TD Ameritrade because they like the company's service.

Online brokers now charge an average of $10 per stock trade, says Adam Honoré of Aite Group, a financial research firm. That's considerably less than the $30 or more that full-service brokers charge for an online stock trade. If you don't need the extra attention, don't pay for it.

Buy-and-hold investors should avoid brokers that charge an inactivity fee. E-Trade, for example, slaps a fee of $40 per quarter on account holders who don't make any trades.

Investors with smaller balances should also mind account minimums. Vanguard, for instance, has a well-earned reputation for low-cost mutual funds. But it charges an annual service fee of $20 for each fund with an account balance of less than $10,000. You can avoid the charge by signing up for electronic delivery of your statements.

To encourage customers to use electronic statements, some companies charge for a paper trail. TD Ameritrade bills customers $2 per month for paper statements.

Transfer fees can hamstring you if you want investment options that aren't on your company's menu. Charles Schwab charges $25 to move part of your balance to another company and $50 to move the entire amount.

Most broker fees are clearly listed on a company's Web site or in a brochure. One glaring exception is the 12b-1 fee, which is really a sales charge in disguise. Funds may tack on the fee -- up to 1% of your investment -- to their expenses, supposedly to cover marketing and distribution costs. It's actually used primarily to pay brokers or advisers who sell you the fund. Nevertheless, a fund is allowed to bill itself as "no-load" as long as its 12b-1 fee is 0.25% or less per year. And you'll have to check the fee table in a fund's prospectus to see if it charges a 12b-1.

If you build your own portfolio, selecting no-load funds can save you more than 5% in sales charges. And over the long term, the top-performing funds tend to be those with the lowest costs. A fund's annual operating expenses (its expense ratio) are calculated as a percentage of the assets you have invested. Invest $10,000 in a fund with an expense ratio of 1.5%, and you'll pay $150 per year.

Avoid stock funds that have an annual expense ratio of more than 1.5% and bond funds with a ratio of more than 1%. If you invest in a fund of funds, such as a target-date retirement fund, make sure it doesn't charge a management fee on top of the expenses levied by the underlying funds.

Zapping cell phone and land line fees

Of all the fees that cell phone companies can sting you with, high "overage" charges often smart the most. The hefty penalty for using more minutes in a month than allotted by your plan ranges from 5 cents to 45 cents per minute.

In 2006, shortly after finishing graduate school at Stanford, Prashanth Ranganathan got slapped with a $246 overage fee. Incensed, Ranganathan, 29, built a computer program that monitors his cell phone usage on his desktop.

The program automatically tracks his minutes by linking to his account via his cell phone provider's Web site. With his friend Aniq Rahman, Ranganathan created a Web site called WatchMyCell. So far, more than 13,000 people have downloaded the free tool. You can also monitor your cell phone usage by logging in to your account on your provider's Web site.

Text messages -- the bane of many a parent's existence -- can cost up to 20 cents per message to send or receive. So you (or your kids) can save by buying in bulk. T-Mobile offers 400 text messages a month for $4.99; AT&T charges $5 for 200 messages.

Switching to a cheaper plan and canceling a one- or two-year contract triggers an early-termination fee that can run as high as $200. To avoid that pain, try to transfer your service contract to someone else. For a fee of $18 to $25, Web sites such as Celltradeusa.com and Cellswapper.com help match buyers and sellers.

Avoid overage charges and cancellation fees altogether by purchasing prepaid service from companies such as T-Mobile, AT&T's GoPhone or Virgin Mobile. Customers can cancel their service with no penalty, and monthly rates are competitive.

Continued: Taxes on cell phones

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