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25 Sep 2019

Revolut makes stock trading free for all customers: is now the time to invest?

Is commission-free stock trading worth it?

Revolut's zero-commission stock trading feature is now available to all customers, giving more people the chance to dabble in the stock market for free. But are there any drawbacks?

The roll-out comes a month after Revolut launched commission-free trading for its Metal customers, allowing them to buy and sell 300 US stocks.

Here, we take a look at how Revolut's stock trading feature works and caveats that new customers need to watch out for.

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What is Revolut?

Revolut is a London-based digital-only banking app, which launched in 2015.

It offers three types of account, all of which come with a prepaid Mastercard that lets you spend abroad in more than 150 currencies, and exchange money in 29 currencies in the app.

Customers can opt for a free standard account, the Revolut Premium account for £6.99 a month or the Revolut Metal account for £12.99 a month.

Find out more: challenger banks - all you need to know

Revolut expands its free stock trading feature

Revolut has now opened its free stock trading feature up to its Standard and Premium customers.

If you have a free standard account, you'll be able to make three free trades a month.

Revolut Premium customers will be able to make eight free trades a month, while those with a Revolut Metal account can make unlimited free trades a month using the feature.

Revolut has also added an extra 150 US stocks to the platform, including Groupon and Worldpay. This means that investors can now have a choice of more than 450 stocks to buy and sell.

There is no account minimum required, which means that you can buy fractional shares for as little as $1. This can be especially useful if you don't have enough money to buy a full share in a company.

All customers will be able to download a monthly statement directly from the app too.

Is Revolut's platform completely free?

Revolut's stock trading platform isn't completely free.All Revolut customers that use the platform will be charged an annual custody fee, amounting to 0.01% of their portfolio.

Standard and Premium customers will also incur a charge of £1 for each trade made in addition to their free quota.

Since Revolut only allows you to select from two US stock exchanges, your selection of companies to invest in will be limited. Trading US shares also means you'll have to pay 15% withholding tax on any dividends you earn (plus you'll need to fill in a W-8BEN form).

As you'll be buying and selling in US dollars, you'll need to pay attention to exchange rates. All currency transactions are made through Revolut's multi-currency wallet using their exchange rates.

Are investments FSCS protected?

Revolut is not a bank, and money held with Revolut is not protected by the Financial Services Compensation Scheme (FSCS).

Instead, your money is subject to Revolut's safeguarding terms. According to those terms any money that you hold with Revolut, will either be:

  • Placed into a ring-fenced account which is separate from the company's own money
  • Invested in low-risk assets held in a separate account

This means that should Revolut go bust, they have to repay you from the ring-fenced funds before they pay off other debts.

Neither Revolut's terms nor the FSCS will compensate you if the value of your investments falls.

How does Revolut compare?

Compared with some of the leading investment platforms, Revolut's offering looks very cheap.

Hargreaves Lansdown, for instance, charges up to £11.95 per order, though this falls to £5.95 for the most frequent investors. Others companies such as AJ Bell, Barclays and Interactive Investor charge between £4.95 and £10 per trade.

However, these fund supermarkets do give you access to a much wider range of investments and stock exchanges.

What's more, unlike Revolut, these platforms enable you to invest within tax-free wrappers such as a stocks and shares Isa or a Sipp. This means you don't have to pay dividend tax or capital gains tax when you sell investments.

Some commission-free platforms offer Isas, such as Trading 212 and Freetrade, as well as access to UK shares and funds.

Is commission-free stock trading worth it?

Commission-free stock trading platforms, such as Revolut, can serve as a basic introduction to the world of stock-picking for people eager to ease into investing.

It's important to bear in mind that the service and choice of investments offered by such platforms is much more limited than the leading fee-charging investment platforms.

If you're just beginning to invest, it's vital to do your research and invest in a variety of different assets, rather than putting all of your money into stocks.

For more information, listen to the Which? Money Podcast episode below where we discuss the pros and cons of free stock trading platforms.

You can also check out our guides on investment platforms and how investing works for more tips and advice.