Several brokerage houses have come up with the prepaid products to attract investors and retain them. Typically, the concept of a pre-paid brokerage cost means paying an upfront brokerage and enjoying discounted rates on your broking transactions. Some brokerage houses also call this an annual maintenance contract (AMC). Large brokerage houses are keen on such schemes as their infrastructure keeps a check on costs while margins improve with a surge in the number of clients.
Each brokerage house has a different pre-paid product. Some have pre-paid products starting from as low as . 2,000 a year, while for high end customers it could go up to . 1 lakh a year. Similarly, the validity of each pre-paid brokerage account could vary. While some have a validity of a year, there are brokerage houses which have launched pre-paid cards which have life-time validity. Again, the terms and conditions of brokerage houses are different. In the case of India Infoline, the customer can enjoy the benefits of substantially lowered brokerage against the prepaid scheme for a lifetime, while he can withdraw the prepaid amount anytime he chooses. They also adjust depository charges against this pre-paid brokerage. However, some other brokerages do not refund the unused brokerage amount, though they are ready to extend the tenure on a case to case basis.
Brokerages such as ICICI Securities, India Infoline, Sharekhan and Nirmal Bang offer pre-paid broking services to their clients. Most brokerage houses offer this service across their equity and commodity products as well as currency products.
According to brokerage houses, pre-paid broking card works for both the customer as well as the brokering house. The customer gets reduced broking charges for his transaction, while a brokerage house, gets upfront commitment of brokerage and ensures retention of client. IIFL offers such products starting from 10,000, while in the case of ICICI Securities, the products are priced from 25,000 upwards. Some critics feel that these schemes will appeal only to high volume traders and not to retail investors whose frequency of trading could be a mere 1-2 trades a month.
