By now, most investors have cryptocurrency in their portfolio, which means withdrawing at some point. However, like most banking institutions, cryptocurrency exchanges also have withdrawal fees. The good news is that you can do certain procedures to minimize them.
Minimizing the fees and costs of transferring funds from one cryptocurrency to another is an important step toward maintaining the full value of your crypto earnings. In some cases, transaction fees can vary between the two cryptocurrencies and two exchanges, and knowing such fine details will play a big role in minimizing the withdrawal fees.
This article will discuss the five tips to implement to help cut down the cost of withdrawal fees:
1. Use Cryptocurrency Debit Card
You might have heard of prepaid debit cards, which allow users to store their money in a card rather than a bank account. A similar concept exists for cryptocurrency users — except instead of using fiat currency, they're using cryptocurrencies. A cryptocurrency debit card allows you to spend your digital currency anywhere regular debit cards are accepted.
The advantage of using this type of card is that it allows you to avoid converting your cryptocurrency into fiat currency before making withdrawals and purchases. This can save time and money because there are fewer steps involved in the transaction process, especially if you're buying something with your crypto earnings or simply paying off bills or other expenses directly from your wallet.
If you don’t have a crypto debit card yet, you can sign up for a virtual debit card. The best virtual debit card will allow you to spend your crypto like any other debit card and avoid the need to withdraw.
2. Use Exchanges With Lower Fees
The most obvious way to reduce costs is by using an exchange with lower fees. There are many exchanges, but only a few charges below 1% per transaction. Some exchanges can charge up to 3% per transaction or charge a flat fee in USD or crypto for every withdrawal you make. Therefore, it's important to compare these fees to determine which is the lowest and use the exchange instead. Also, you can take advantage of discounts and promotions that allow you to withdraw crypto for free.
Alternatively, if an exchange charges high fees, consider using your wallet instead of depositing your funds into their wallet. For example, if you have USD$100 worth of Bitcoin and want to buy some Ethereum with it, instead of depositing the USD$100 into the exchange's wallet, they'll charge 3% and send it directly from your wallet.
3. Withdraw In Bulk
Every time you withdraw your cryptos, there's a small fee being charged, which can be a percentage of the amount you're withdrawing or a flat fee charged by the exchange. This will mean that you're paying a fee and losing a chunk of your money every time you withdraw.
The best way around this is to keep your withdrawals and only make bulk withdrawals at a time. This will ensure that you don't pay several network fees, which can cut the withdrawal fees by over 50%. Moreover, several exchange rates have a lower withdrawal fee for a large amount of crypto. For example, you may be charged 1.5% for withdrawals with of USD$10,000 and only 1% or less for withdrawals of amounts more than that.
4. Use Peer-To-Peer Transfer
Peer-to-peer transfers allow you to send money directly from one person's wallet to another without going through a third party. You can also use these sites to buy or sell bitcoin in person. The best thing about peer-to-peer transfers is that they tend to be cheaper than other transactions because there's no intermediary involved in the process. However, you must choose a reputable service to avoid being scammed.
5. Choose A Coin With Lower Fees
Different exchanges will charge different amounts for withdrawing different coins on the platforms. This depends on the popularity of the coins, the ease of mining, and the community backing the coins. So, it's common to find one platform that charges about USD$3 to withdraw bitcoin from their platform but only charge less than USD$2 for the Binance coin (BNB) or Ethereum (Eth) in the same amount.
Therefore, you should check how the different coins are charged on the same platform. If the fees vary, then convert your coins to the one with the least fees. However, you should be mindful of the liquidity of the coins that you're purchasing. A less liquid coin can take longer to convert to fiat, and that's something to avoid.
One of the major reasons cryptocurrencies have been popular is because they make money transfers more affordable. This means that transaction costs such as withdrawal fees should be minimal to serve this purpose, or you may end up paying more. The tips discussed mentioned above can help minimize those costs efficiently.