03/04/2013 11:29 am ET Updated May 04, 2013

Why You're Using the Wrong Online Broker -- And How to Stop

The process of picking an online investing account is confusing at best and harrowing at worst - and evidence shows many Americans still aren't using the right online brokerage account for their needs.

A recent NerdWallet study found that investors with the three largest online brokerages are collectively throwing away over $1.8 billion a year in unnecessary and sometimes hidden fees. Furthermore, only 12 percent of their trading fees are actually going to trade execution quality at these top brokerages, with the rest of their commission is going to things like advertising and overhead expenses.

The takeaway? Over 17 million investors are paying too much for perks and services they don't need, or they could oftentimes be receiving them more cheaply elsewhere. Given these odds, chances are high that you aren't using the best, most affordable online broker for your needs.

NerdWallet lays out how you can find out whether you're using the wrong online broker, and if so, how to do something about it.

1. Know Thyself

The first step is to get a sense of your investing habits and behavior. Do you know approximately how many times a month -- or year -- you actually place orders to buy and sell stock, mutual funds, ETFs, or other types of investments? Log into your accounts and take a look, to remind yourself what types and frequency of trading you've done over the past year; the answers might not be what you expected to see.

2. Create Your Own Checklist

Next, do you use any additional features that your current brokerage offers -- research reports, charting software, automated orders by phone, broker assisted trades, or any other premium perks? If not, and if you only use the account to buy and sell, you could definitely benefit from considering a deep discount broker.

3. Using Your Wish List, Plug and Chug

What if you do want some premium features above, but you aren't quite sure what you want? It's key to remember that online brokers tend to focus their advertisements on the 'per trade' price, but that isn't the only price that should matter to you.

To figure out your exact total monthly trading costs, you can use NerdWallet's free and unbiased brokerage account screener to calculate your projected total expenses, taking into consideration any annual account fees, hidden fees, and the additional costs you might have to pay for like research reports, real-time data feeds, or other extras should you decide you want them. You can plug your preferences into playing around with the options to come up with a checklist for what you really want.

This will allow you to compare brokerage accounts to ensure that you're truly getting what you pay for, saving money along the way.