In Australia, more people are trading, investing, and even using digital currencies to pay for goods and services than ever before. Some experts suggest that as many as 6.2 million Aussies currently own or have owned some form of crypto, with thousands more taking their first steps into crypto trading every week.
If you are considering doing so yourself, it’s important to understand one of the main things that can quietly eat into your profits. Exchange fees.
These fees might look small at first glance. But over time, they can quickly add up. Therefore, knowing how they work and how to compare them can make a big difference in your overall returns.
Here is our take on what traders should know before signing up to an exchange.
What Are Crypto Exchange Fees and How Do They Work?
When you buy or sell cryptocurrency on an exchange, you will have to pay a fee for the transaction. Essentially, this is how exchanges make money and keep their platforms running. However, fees do vary depending on the platform. So, by understanding how they are accrued, you can avoid unnecessary costs.
Australia is home to several crypto exchanges. Each one has its own pricing model. But most charge fees in a few common ways. Typically, these take the form of trading, deposit, withdrawal, and spread fees.
Common Types of Fees on Australian Crypto Exchanges
Trading fees are the most common type of fees you’ll experience on any exchange. That is because every time you buy or sell crypto, you’ll pay a small percentage of the total amount. This usually ranges between 0.1% and 1%, depending on the platform. However, deposit and withdrawal fees may also apply when moving money in or out of your account, as determined by the method used.
Spread fees are another important cost you will need to get your head around if you want to trade in crypto. This is the difference between the buying and selling prices. Some exchanges show it as a separate charge, while others build it into the total cost. In addition, network fees also apply when transferring crypto to an external wallet. They are charged by the blockchain network itself.
Maker and Taker Fees Explained for Beginners
Most exchanges use a maker-taker model when imposing their fees. A “maker” adds liquidity to the market by placing a limit order that doesn’t execute right away. Conversely, a “taker” removes liquidity by accepting an existing order. Generally speaking, makers usually pay lower fees as they help the market stay active.
For this reason, understanding whether you’re a maker or a taker can help you choose an exchange that fits your trading style. For example, if you would prefer to set prices and wait for a match, then a maker-friendly exchange can save you money in the long run.
How Much Are Crypto Trading Fees in Australia?
As mentioned, trading fees on Australian exchanges typically fall between 0.1% and 1%. For instance, Independent Reserve, one of the country’s oldest exchanges, starts its charges at 0.5% per trade. However, it can go as low as 0.02% based on a trader's 30-day volume.
Elsewhere, Swyftx’s range from 0.1% to 0.6% depending on your trading tier. They do not charge for deposits or withdrawals. CoinSpot charges a flat 1% fee for instant buys and sells.
Here is an Australian crypto exchange fee comparison you can refer to.
Hidden Crypto Exchange Costs to Watch Out For
Many traders focus only on trading fees. However, it is important to keep an eye out for other fees and hidden costs, which can have a bigger impact. Conversion fees, for instance, apply when converting between cryptocurrencies or fiat currencies. Some platforms also charge inactivity fees if your account remains idle for too long, which you should be aware of.
Another cost to consider is the spread. This is particularly pertinent during low market activity or when trading smaller coins. These spreads can make trades more expensive without you even realising it. Subsequently, it is worth keeping an eye on all possible fees to ensure you’re not paying more than necessary.
How to Avoid High Trading Fees When Buying or Selling Crypto
So, how can you avoid paying for high trading fees? Well, you’ll be pleased to discover there are several ways you can keep your trading fees low.
The first step is to compare exchanges carefully and read their pricing pages before registering. Many Australians save money by using limit orders instead of instant buys. These often come with lower taker fees.
It is also worth using exchanges that offer fee discounts for high trading volumes, as well as free deposit and withdrawal options like PayID or direct bank transfers. When you do trade, it is also advisable to avoid making frequent small trades. Instead, combining them into fewer, larger transactions can help you reduce your overall costs.
Another helpful tip is to check the spread before placing an order, especially during periods of high volatility. Spreads can widen significantly when the market is busy. Therefore, timing your trades can make a difference.
Which Exchange Is Right For Me?
The answer to this question is entirely up to you and largely depends on how active as a trader you will be.
However, if you trade regularly, a platform that offers volume-based discounts might be your best bet. Casual traders, on the other hand, may prefer a user-friendly platform with simple pricing and no hidden costs.
Regardless of which platform you use, it is important to stay up to date with any changes in fees they might make. The more you understand how their fees work, the more control you will have over your money, which will help you maximise your trading profits.
