Cryptocurrency investors throw away a fortune on fees paid to credit card companies, banks, and exchanges. There is no reason to pay high fees with every purchase and transfer of cryptocurrency. Here are 6 ideas to minimize those fees and thereby maximize your cryptocurrency investments.
1. Do Not Buy Cryptocurrency With a Credit/Debit Card
The fee to buy cryptocurrency with a credit/debit card is 3.99% or more on most cryptocurrency exchanges. You may like the near-instant speed of buying with a credit/debit card, but you are paying for it. There are much cheaper ways to buy cryptocurrencies that still provide the speed of a credit/debit card transaction, provided you plan ahead. Follow the other ideas in this article to stop buying cryptocurrency with credit/debit cards and save on fees.
2. Buy Cryptocurrency With an Exchange Deposit Account
A deposit account at an exchange is the cheapest way to buy cryptocurrency with fiat currency. We will use Gemini and GDAX to illustrate how it works similar to traditional online investment accounts. First, deposit fiat currency into your Gemini or GDAX account with an ACH bank transfer. Your deposit is free and your deposited U.S. dollars are FDIC insured. Second, buy cryptocurrency on Gemini or GDAX with the fiat currency in your account. Your buy order is either free or costs a 0.25% fee. In total then, rather than pay 3.99% or more for a credit/debit card purchase, you will pay 0% – 0.25%.
3. Create a Reserve Fund of Fiat Currency on Gemini or GDAX
Using an exchange deposit account to buy cryptocurrency is slow if you do not plan ahead. It takes 4-5 days for an ACH bank deposit and 1-2 days for a wire transfer deposit to clear. On Gemini, you cannot transfer bitcoin or ethereum off the exchange until the deposit clears (although you can buy immediately). On GDAX, you cannot even buy cryptocurrency until the deposit clears. Especially in a market dip, you may want to buy and possibly transfer cryptocurrency immediately without waiting for your deposit to clear.
The solution is simple, but so many new bitcoin investors don’t do it. Deposit fiat currency into your Gemini or GDAX account in advance to build up your account funds. This will create a reserve fund of fiat currency that is ready to deploy for dollar-cost average investing, during a market dip, or if you fall prey to FOMO. You can also set limit orders to buy cryptocurrency at specified prices with your reserve fund.
4. Place Free Maker/Post Only Orders on GDAX
You can buy bitcoin, litecoin, ethereum, or bitcoin cash with no transaction fees on GDAX. First, deposit fiat currency into your GDAX deposit account for free. Second, with your deposited funds, put a “maker” buy order on the GDAX order book. A maker order is also now called a “post-only” order in the GDAX trading interface. A maker or “post-only” buy order is essentially an order to buy cryptocurrency at below the current market price. It sits on the GDAX order book until filled. A maker order or post-only order is free on GDAX. In contrast, a taker order is 0.25% on GDAX The below video from DeepLizard Crypto explains how to place a maker or post-only order on GDAX.
5. Immediately Purchase BTC and ETH on Gemini With ACH Transfer
On Gemini you can immediately purchase bitcoin and ethereum upon initiating an ACH bank transfer. There is no need to wait for the ACH bank transfer to clear. Therefore, if you failed to pre-fund a fiat currency reserve account, Gemini is convenient for buying up to $500 (the daily limit) of bitcoin or ethereum on a market dip and without using a credit/debit card.
6. Stop Paying Bitcoin Withdrawal Fees on Coinbase
You may want to transfer bitcoin from Coinbase to a wallet for safekeeping or to exchanges like Binance and KuCoin that allow investing in dozens of other cryptocurrencies. The problem is that Coinbase charges the bitcoin network fee for each transfer. That fee is currently unreasonably high. You can avoid the bitcoin network fee though. First, transfer bitcoin from Coinbase to GDAX. This is free. Second, transfer bitcoin from GDAX to your wallet or another cryptocurrency exchange. This is also free. You have completely avoided the bitcoin network fee!