Cryptocurrency exchanges are businesses too – and, like all businesses, they need to make money. Naturally, the way in which these sites choose to bolster their bottom line is a matter of personal preference. However, with the industry hitting new heights over the last few years and the list of leading crypto exchanges growing all the time, competition is rife. Therefore, the top platforms try to keep their costs as low as possible. Put simply, wherever you trade, cryptocurrency fees will be part of the process. Below are our recommendations for exchanges that offer the lowest fees.
Why Do Exchanges Charge Fees?
As we’ve said, cryptocurrency fees are a natural part of the industry. However, just because you can’t avoid them doesn’t mean that can’t learn to manage them well. The only way to do this is to understand what you’ll have to pay and when you’ll have to pay it. In general, you’ll run into crypto exchange fees at the following moments:
Deposit Fees: Some exchanges will change a small fee when you make a deposit or when you use a certain deposit method. For example, our Coinbase review explains that you won’t have to pay deposit fees when you use bank transfer or debit card. However, if you use a credit card, your issuer may apply additional charges. There may also be a time when you have to pay a withdrawal fee. For instance, when you read our eToro Review, you’ll notice that it has fairly low crypto fees. However, there is a flat $25 charge for each withdrawal.
Purchase/Selling: The main point at which you’ll pay a cryptocurrency fee is when you buy or sell a digital token. For example, if you’re looking to buy Bitcoin (BTC), you’ll pay a small fee based on the size of your transaction. As we’ve noted in our Luno review, you’ll pay almost 1% on buy and sell transactions on this platform. In contrast, all-crypto exchange Binance charges around 0.1%.
Spread: Another way exchanges apply fees to your transactions is by building them into the price of each trade. This is a common technique used by online brokers such as eToro and ForexTB. Put simply, the “spread” will incorporate your costs. This method often results in lower fees. What’s more, it’s easier to understand because the price you see is the price you pay, rather than one price + another price = your trading fee.
Transfer Fees/Mining Fees: The final way in which cryptocurrency fees may impact your potential profit is mining fees. Each digital currency will have a network of miners that process transactions. To compensate these miners, you’ll have to pay a fee when you send coins to crypto wallets or exchanges. On certain networks such as Ethereum (ETH), you can choose to pay a higher fee so that transactions are processed faster.
Are there Any Crypto Exchanges that Don’t Charge Fees?
Avoiding cryptocurrency fees is virtually impossible. Because each exchange is a profit making business, the owners aren’t going to let you trade for free. However, you can seek out the lowest fees possible. One tip is to send funds between exchanges using Litecoin (LTC). Miner fees for Litecoin are lower than Bitcoin, which means you can send coins for less. The other way to reduce your costs is to use low-fee crypto exchanges. Some of our top picks include:
- Learn more about 0.1% fees on Binance by reading our Binance review.
- Learn more about flat 0.25% fees on Bittrex by reading our Bittrex review.
- Learn more about 0.20% trading fees on CEX by reading our io review.
How Fees Affect Your Profits
Unsurprisingly, the more you pay in crypto fees, the lower your profits will be. If you make the wrong decision and choose an exchange with deposit and trading fees topping 10%, you’d lose £10 for every £100 you make. That’s a big hit, especially when you consider the volatile nature of trading. Therefore, if you want to maximise your potential returns, you need to do your research. The best way to do that is read through our crypto exchange reviews, weigh up all the variables and find the site that offers the right mix of options for you.