Understanding Crypto Exchange Fees: A Comprehensive Guide

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Here are some of the tricks platforms use to dip into your crypto cash.

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Key points

• Cryptocurrency investors will pay fees when they deposit, trade, or withdraw money.
• Withdrawal fees can be over $100 for certain cryptocurrencies.

Check out The Ascent's cryptocurrency apps for 2021

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Cryptocurrency exchange fees can creep up on you. It may seem like you're only paying a couple of dollars here and there, but those dollars add up -- and they can seriously eat into your profits.

If you're shopping around for the best cryptocurrency app or exchange, it's difficult to make direct fee comparisons as there's very little standardization across the platforms. One exchange might charge more to deposit money but offer cheap withdrawals. Another might seem to offer free trading but give you poor exchange rates.

Here are some fees that can surprise you.

1. Deposit fees

Some crypto exchanges promote a wide mix of ways you can deposit money -- from a bank transfer to credit or debit card deposits and PayPal transfers. But be aware that it's often free to transfer money directly from your bank, whereas credit or debit cards can incur a 2% to 5% fee. You can pay 2.5% or more to deposit money via PayPal.

Sometimes, rather than depositing money to use to trade later, you'll have to buy cryptocurrency directly. This combines a deposit fee and a trading fee, and it's not always clear how much you're being charged.

For example, I tried to buy around $250 worth of Bitcoin (BTC) by debit card with a platform that uses a third party to process the payment. It says there is no fee, but when I use the converter tool on sites like CoinMarketCap to check the rate, I'm actually only buying $240 worth of BTC.

2. Trading fees

Trading fees come in many guises and depend on how much you're spending and whether you're using the "convert" function or the trading tool. Several exchanges offer an easy "convert" option for new traders, but these are often the most expensive to buy crypto.

Make sure you understand what you're being charged so you'll know how to reduce the fees. Here are the most common trading charges:

• Flat fee: One leading exchange charges a fee of $0.99 for trades below $10 and more for higher trades.
• Percentage fee: You'll often find a maker/taker fee, which is a percentage of the total trade. This can be reduced by paying with the platform's utility token and often gets lower the more you trade.
• Lower rates: As with the example above, some low-fee platforms hide their charges in the spread you're offered. Look carefully at how much crypto you're getting for your dollar. One tip is to compare the total with what you'd get on other sites. You can also use crypto tools like CoinMarketCap or CoinGecko to find the market rate.

Finally, be aware that some platforms charge a combination of the fees listed above -- you may find you pay a flat fee and get an unfavorable rate. Or you may find there's a percentage charge on top of the flat fee.

3. Withdrawal fees

The final kicker when it comes to cryptocurrency fees is the withdrawal fees. If you want to leave your assets on the platform where you bought them (in what's called a custodial wallet), this is less of an issue.

You can either withdraw traditional fiat money to your bank account, which will probably incur a percentage fee. Or you might want to move your cryptocurrency to another platform, a non-custodial wallet, or another person's wallet.

Many crypto investors prefer to keep their assets in a non-custodial crypto wallet. The thinking 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's why some people prefer to move their cryptocurrencies to a wallet they control.

Some platforms like Gemini offer a limited number of free withdrawals each month. Others don't charge if you want to withdraw to their external wallet, but you'll pay for other wallets. Most charge a set amount of the cryptocurrency you want to withdraw.

For example, one platform charges 0.0035 ETH (about $16) to withdraw Ethereum, but only 0.1 ALGO to withdraw Algorand (about $0.20). And it charges a whopping 40 LRC (over $100) to withdraw Loopring. It's important to pay close attention to what each cryptocurrency can cost.

One trick I've used is to convert my crypto into an asset that's cheap to withdraw and then convert it again on another platform. But that won't help if you plan to hold it in a 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 above, you can minimize those 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's no account setup or middleman), the fee structure is totally different. You'll need to buy crypto using a centralized exchange or third-party app to get started, and then you'll probably have to pay Ethereum gas fees for each transaction. These vary depending on how congested the Ethereum network is -- but can be as high as $100 or more.

Buy and sell crypto on an expert picked exchange

There are hundreds of platforms around the world that are waiting to give you access to thousands of cryptocurrencies. And to find the one that's right for you, you'll need to decide what features that matter most to you.

To help you get started, our independent experts have sifted through the options to bring you some of our best cryptocurrency exchanges for 2021. Check out the list here and get started on your crypto journey, today.