Top Seven Demat Account Charges That You Must Be Aware Of

Gone are the days when the news about the securities market was largely confined to the finance pages of newspapers and finance menu of websites. The last few decades have seen the market grow from strength to strength and attract the interests of an increasing number of investors, particularly first time investors. With the streamlining of the demat account opening process, entering the securities market has become extremely feasible. There are, however, a host of charges that you must be mindful of when you open a demat account. In this article, we shall discuss seven key types of demat account charges.

Seven prominent categories of demat account charges

When you start the demat account opening process, it is likely that you may find several demat account offerings that are marketed as free accounts. In reality, however, demat accounts carry several types of charges such as

1. Demat account opening charges:  The first type of demat account charges that you are likely to encounter is account opening fees. As the name suggests, this charge is levied at the time of account opening. These days, most depository participants waive this category of demat account charges. Hence most demat accounts are offered as free demat accounts despite carrying a wide array of other charges.

2. Demat account transaction charges: Once your demat account has been opened and you start using it to store securities, each transaction shall entail a charge termed as transaction charge. This could either be a flat fee or vary depending upon the total value of the transaction.

3. Demat account Annual Maintenance Charges: One of the most important categories of demat account charges is the annual fee. This charge is levied by the depository participant for the maintenance of the account. Different types of demat accounts carry varied annual charges. This type of demat account charges are levied irrespective of the activity level in the account. Some depository participants may choose to waive annual charges, particularly during the first year of the operation of the account.

4. Demat account custodian charges: Since depository participants serve as the safe keepers of the securities held in a demat account, they charge custodian charges for the service. This charge is usually a nominal fee.

5. Dematerialisation charges: Should you wish to convert physical shares into dematerialised shares, you shall have to bear a type of demat account charges termed as dematerialisation charges. The amount of the fee shall be determined based on the number of securities being converted to a demat form.

6. Rematerialisation charges: If you wish to convert securities held in a demat form into physical securities, the process shall attract a demat account charge titled rematerialisation charges. The total amount of the rematerialisation charges shall depend on the number of securities that are being converted into physical certificates.

7. Demat account reactivation charges: If you do not use your demat account for a period exceeding twelve months, the account may be marked as a dormant account. Such an account cannot be used until you complete the process of account reactivation. In order to reactivate the account, you may have to pay account reactivation charges. 

The bottomline 

It is important to study the schedule of charges associated with a particular demat account before you go ahead with the selection of that account and the demat account opening process. Not only do demat account charges affect your overall investment budget, but they can also be critical to the comparison of various demat account offerings and the selection of the right account for you.