Here are some of the tricks that platforms use to dive into your crypto cash.
the main points
- Cryptocurrency investors will pay a fee when they deposit, trade or withdraw funds.
- Withdrawal fees can be more than $100 for some cryptocurrencies.
Cryptocurrency exchange fees may increase. It may seem like you only pay a few dollars here and there, but those dollars add up — and can seriously eat into your earnings.
If you are shopping for the best cryptocurrency exchange or app, it is difficult to make direct comparisons of fees as there is very little standardization across platforms. An exchange may charge more for depositing funds but offers cheap withdrawals. Others may seem to offer free trading but give you poor exchange rates.
Here are some drawings that may surprise you.
1. Deposit fee
Some cryptocurrency exchanges are promoting a wide variety of ways you can deposit money – from bank transfer to credit or debit card deposit and PayPal transfers. But know that transferring money directly from your bank is often free, while credit or debit cards can incur fees of 2% to 5%. You can pay 2.5% or more to deposit money via PayPal.
Sometimes, instead of depositing funds to be used in trading later, you will have to buy cryptocurrency directly. This combines deposit fees and trading fees, and it is not always clear how much you are charged.
For example, I tried to buy Bitcoin (BTC) worth about $250 with a debit card through a platform that uses a third party payment processing. It says there are no fees, but when I use the converter tool on sites like CoinMarketCap to check the price, I’m actually only buying $240 of bitcoin.
2. Trading fees
Trading fees come in many forms and depend on how much you spend and whether you use the “conversion” function or the trading tool. Many exchanges offer an easy “convert” option for new traders, but they are often the most expensive to purchase cryptocurrencies.
Make sure you understand what you are being charged so you know how to reduce fees. Here are the most common trading fees:
- flat fee: One of the leading exchanges charges a fee of $0.99 for trades of less than $10 and more for higher trades.
- Percentage Fee: You will often find a maker/trader fee, which is a percentage of the total trade. This can be reduced by paying with the platform’s utility code and often it goes down as you trade.
- lower rates: As with the example above, some low-fee platforms hide their fees in the spread they offer. Look carefully at how much crypto you get for your dollar. One tip is to compare the total to what you’ll get on other sites. You can also use crypto tools like CoinMarketCap or CoinGecko to find out the market price.
Finally, be aware that some platforms charge a combination of the above fees – you may find that you pay a flat fee And Get an unfavorable price. Or you may find that there is a percentage fee above the flat fee.
3. Withdrawal fee
The last factor when it comes to cryptocurrency fees is the withdrawal fee. If you want to leave your assets on the platform you bought them from (the so-called custodian wallet), that’s not a problem.
You can either withdraw traditional paper money to your bank account, which will likely incur a percentage fee. Or you may want to transfer your cryptocurrency to another platform, a dishonest wallet, or someone else’s wallet.
Many cryptocurrency investors prefer to keep their assets in a dishonest crypto wallet. The idea is that leaving your assets on the platform puts you at risk if the exchange gets hacked or for some reason decides to freeze your account. That is why some people prefer to transfer their cryptocurrency to a wallet that they control.
Some platforms like Gemini offer a limited number of free withdrawals each month. Others do not charge a fee if you want to withdraw to their external wallet, but you will pay for other wallets. Most of them charge a specific amount of cryptocurrency that you want to withdraw.
For example, one platform charges 0.0035 ETH (around $16) for withdrawing Ethereum, but only 0.1 ALGO for withdrawing Algorand (around $0.20). It charges 40 LRC (more than $100) for a Loopring pull. It is important to pay close attention to what each cryptocurrency can cost.
One of the tricks I used was to convert my cryptocurrency into a cheap asset to withdraw it and then convert it back on another platform. But this will not help if you plan to keep it in the wallet.
Few things in life are free, and cryptocurrency trading can cost more than you know. But if you pay attention and use some of the tricks mentioned above, you can reduce these costs.
A note on decentralized exchanges
We’ve stuck to discussing centralized cryptocurrency exchange fees so far in this article. If you are using a decentralized exchange (where there is no account setup or broker), the fee structure is completely different. You will need to purchase cryptocurrency using a central exchange or a third-party app to get started, and then you will have to pay an Ethereum gas fee for each transaction. These vary according to how crowded the Ethereum network is – but can run as high as $100 or more.
Buy and sell cryptocurrencies on an exchange chosen by experts
There are hundreds of platforms around the world waiting to give you access to thousands of cryptocurrencies. In order to find the right feature for you, you will need to decide which features are most important to you.
To help you get started, our independent experts have tested the options to bring you some of our best crypto exchanges for 2021. Check out the list here and start your crypto journey, today.