Tips on lowering fees when trading cryptocurrencies

Cryptocurrency trading can be less costly for you if you can follow up with the following tips on how to reduce fees when trading.

Different exchanges charge you differently when you buy or sell cryptocurrency to someone else. That's how they keep running the services. Apart from the fee charged directly by the exchanges, there is the network fees for the blockchain of the cryptocurrency in question, and charges by third party networks such as credit card issuers and banks (ACH). You are also charged fees for using third party cryptocurrency wallets, depending on the blockchain of a cryptocurrency.

The first tip we are not listing here is having an understanding of the various kinds of fees charged when you make a trade or transaction. By having an overview of the types of charges (fees) that accrue on deposits, withdrawals, purchases and sales, you can navigate the high fees problem, although some types of fees are totally unavoidable.

1. If possible, avoid buying using a credit/debit card

The actual problem here is that most crypto traders have to use debit and credit cards because of the benefits of using these cards and financial implications involved with other methods, but they end up paying around 3.99% or more on most cryptocurrency exchanges.

For instance, you would need to buy with a credit/debit card because it helps you buy quickly but there are other methods you can use and achieve the same speed.

Coinbase charges the least for credit card purchases and is 3.99 percent of the transaction.

Most exchanges will charge no fees to buy cryptocurrency with debit card but the issuer will charge some amount. You might also get charged foreign transaction fee by your credit card issuer if you are, for instance, buying Bitcoins on an exchange that is based outside the U.S. and are using an American credit card.

Again, since Visa and Master Card now classify cryptocurrency purchases as cash advances, you will pay more fees when using their credit cards to purchase cryptocurrencies through them, and that's on top of high interest rates charged on the advances. Hence, you might want to understand whether your credit card classifies your purchase as a cash advance. Otherwise, you are better off paying full amount for the crypto than getting the cash advance to buy.

Nevertheless, credit card purchases come with rewards and will offer a financial leverage if they are advancing you some cash in order to trade cryptocurrencies. The latter makes it possible to trade larger amount of crypto when you do not have an equivalent capital. Therefore, in addition to the tips we shared on using leverage, make sure you get profits from the purchases of those coins and that the purchase by credit card is not categorized as a crash advance.

2. Buy cryptocurrency with an exchange deposit account

Depositing fiat on a crypto exchange account and then using it to buy cryptocurrencies is the cheapest way of buying cryptocurrency for a trader. Most cryptocurrency exchanges will allow you to deposit fiat free of charge although it will take time to reflect the amount. After that, you are able to buy the cryptocurrency you want at fee as little as 0.25% fee.

On GDAX and Gemini (up to $500 daily and $15,000 daily), for instance, you can deposit fiat for free and then buy the crypto you want for fees as low as 0.25%.

3. Use a reserve fund or fiat currency

It can take a few days (up to 5) to buy cryptocurrencies using ACH bank deposit and around 1 or 2 days for a wire transfer because the deposit transaction will take time to go through. Although you can buy Bitcoin or Ethereum on Gemini immediately before the transaction goes through and reflects on the exchange account, it is not possible to transfer it until the deposit clears. Also, it is not possible to buy cryptocurrency on GDAX until the deposit transaction clears.

Waiting for the deposit transaction to clear can hurt you badly during a market dip and when you want to make a quick buy to take advantage of the prices. This is where planning deposits is important: you can deposit fiat into your Gemini or GDAX account beforehand to create a reserve fund. With reserve funds on any exchange, you can take buying initiative immediately when needed.

4. Use free maker/post only orders on exchanges

GDAX allows you to buy bitcoin, Litecoin, Ethereum, or bitcoin cash without any fees using the maker order option. You first deposit fiat into GDAX account for free. With these deposited funds, put a “maker” buy order (also called a “post-only” order) on the GDAX order book. This type of order is an order to buy cryptocurrency at below current market price and it will sit on the order book until it is filled.

In comparison, a maker order will cost 0.25% on GDAX.

It is not on GDAX only where you can buy for free, most cryptocurrency exchanges allow you to reduce fees by placing a maker fee (maker orders is where you give an offer to buy/sell and someone else accepts it. Taker orders are those that you accept when offered by someone else). Actually, all exchanges have different maker and taker fee with maker fees being lower.

With Square Cash app, you can also buy/sell Bitcoin without any fees from their app.

5. Use limit buy/sell orders

In addition to using maker orders, you can create limit orders -- which are orders placed with conditions and which can help you reduce fees on exchanges. For instance, a limit buy allows you to make an order (and buy a certain amount of cryptocurrency) as a maker when a certain price is reached.

A limit buy is filled only when someone accepts it. The same applied for a limit sell order.

These types of orders are types of "maker orders," and as said above, they will have lower fees or no fees at all depending on the exchange fee structure.

6. Purchase BTC and ETH using ACH Transfers

Although we said that you can wait for up to 5 days for a fiat deposit to a crypto exchange via ACH bank transfer to clear, you can buy immediately using ACH bank transfer on exchanges such as Gemini and avoid the waiting period. This is the preferable short cut for those who fail to pre-fund a fiat currency reserve account. Gemini cryptocurrency exchange is most convenient for buying up to $500 (the daily limit) of bitcoin or ethereum on a market dip and without using a credit/debit card.

7. Stop paying high Bitcoin withdrawal fees

Coinbase, for instance, will charge network fees for each transfer of Bitcoin to a wallet in exchanges such as Binance and KuCoin -- a transaction common to those looking for exchanges that offer dozens of other cryporcurrencies. While that fee is very high, you do not have to pay it.

Transfer the Bitcoins from Coinbase to GDAX, which is free and then transfer this to your wallet or another exchange, which is also free.

8. Take time to know the markets

Different exchanges have different fee structures and it can take time to know who charges lowest -- there are hundreds of cryptocurrency exchanges right now. Cryptocurrency exchanges such as Bittrex charge a fixed fee (0.25% for buyers and sellers (maker and taker fee)). Bittrex also does not charge for deposits and withdrawals.

Additionally, Binance charges 0.1% for trading while deposits are free of charge (withdrawals have fees on them depending on the crypto you are withdrawing). You can also use Binance BNB to trade cryptocurrencies and cut fee down by 50 percent.

We also mention Square Cash app, which is just one of the apps you can use to trade Bitcoins for free. CEX.io have a standard fee of 0.25%, they only charges 0.20% per trade while CoinExchange charges 0.15% on average for buy and sell trades on all cryptocurreny pairs. You can use CoinbasePro to trade at fees as low as 0% for maker fee (for amounts up to $100 m) and up to 0.30% taker fee on amounts up to $10m.

Bitfinex also charges 0% to 0.2% to trade while the deposit fee is zero ( except bank wires which are charged at the greater of either 0.1% of the deposit amount or US$20). Withdrawal fee varies from coin to coin. the withdrawal fee for Bitcoin, for instance is 0.0005 BTC; bank wire is the greater of 0.1% or US$20; and express bank wire is the greater of 1% or US$20.

GDAX also charges 0% for maker trades, 0.25% for Bitcoin taker trades, and 0.30% for Litecoin and Ethereum taker trades. Others with low fees include Kraken, KuCoin, Poloniex, HitBTC and Cobinhood.

9. Miners' fees

Miners' fees are set by miners themselves and sending parties can accept or decline these: it works as a free market mechanism. Miners set a fee in order to solve blocks but blocks are sent to miners who has set transaction fees accepted by the sending party.

Hence, a miner setting a very high fees will not get blocks to solve.

For those sending transactions, you can use wallets that allow you to set the fees that you want to pay for the transaction. In most cases, fees are influenced by market and higher fees could mean your transaction going through quickly while a lower fee could mean some delays. Therefore, with some planning beforehand, you can avoid unnecessarily needs for quick transactions, which make you pay more fees.

10. Don't stop searching offers and get more interested

Even as World Cup is on-going, you can get 15 percent off of all orders at CoinMama if you take your verification selfie in-front of any FiFa World Cup match on TV. You can also get a 30% discount on your first order if you take your verification selfie at the stadium of any FIFA match in Russia.

Coinmama is also hosting a World Cup themed promotions https://www.coinmama.com/worldcup where you can win 100 USD if you are in Russia, and happen to be among the first ten to take and share (on Facebook/Twitter) a photo of you at the FIFA stadium holding a sign with your wallet address QR code and Coinmama's logo printed on it.

If the photo is broadcast on live TV, you get USD 1000.

David Kariuki

David Kariuki likes to regard himself as a freelance tech journalist who has written and writes widely about a variety of tech issues that affect our society daily, including cryptocurrencies (see cryptomorrow.com and coinpedia.org); climate change (cleanleap.com), OpenSim and virtual reality (see hypergridbusiness.com). He is currently pursuing a MSc in Environmental Management at Open University. He does write here not to offer any investment advise but with the intention of informing audience, and articles in here are of his own opinion. Anyone willing to use any opinion here as advise to invest in crypto should obviously take own responsibility and accountability of their losses (or benefits) thereof. You can reach me at eqariu@gmail.com or david@cryptomorrow.com