Paying with bitcoin is often associated with substantial fees, but it doesn’t have to be this way. Learn how bitcoin works and you’ll quickly see you can take steps to limit the fees you pay.
Paying With Bitcoin Without High Fees
You can reduce bitcoin fees by carefully choosing the wallet where you store your currency. This is not a physical wallet like you carry in your purse or pocket, but a software program that allows you to exchange digital currency for goods or services.
Many wallets charge transaction fees when, for instance, you purchase a cup of coffee using stored bitcoin. These fees cover the cost of adding your transaction to the blockchain, where cryptocurrency transactions are confirmed by miners (more on this in a moment). Some wallets, however, eschew transaction fees, and when reputable, these platforms can keep more currency in your account.
Watch the Miner Fees
Miner fees are used to motivate others to confirm bitcoin transactions. These miners choose which transactions to add to the blockchain, which is a public record of all transactions. Once added to the blockchain, a transaction becomes final and cannot be reversed.
Miners attach transactions to the blockchain based on the fee they offer. In other words, the greater the miner fee, the more likely your transaction will be quickly confirmed. If you add a low or no fee at all, your transaction may wait days or weeks before getting confirmed.
The Key to Paying Less
Having said all of this, it is possible to push your transaction through with a smaller fee. Many wallet apps allow you to customize your miner fee, but you must do so immediately before you make a transaction. Otherwise, your purchase will be submitted with the default fee attached.
The real key is in timing when you submit your transactions – specifically when the blockchain is less busy. Many businesses are closed on the weekend, for instance, meaning fewer transactions are made and there’s more leeway in the fee a miner will accept. The same is true for transactions made late at night or early in the morning. While this strategy does come with risk, it’s a viable way to avoid expensive miner fees.
Choose an Optimized Wallet
If your wallet doesn’t allow you to customize miner fees, it’s probably time to find one that does. Many wallets suggest an exaggerated fee set as high as 50 to 100% of the payment amount. This means a $10 service could end up costing as much as $20. Check the settings on your wallet and adjust them if possible. If you cannot, as we mentioned just a moment ago, find a wallet that allows for more flexibility.
Before paying with bitcoin, you must first acquire the currency, and plenty of brokers can be found online. These service providers charge a fee to obtain the bitcoin for you, anywhere from 1 to 11% of your purchase amount, meaning there’s significant variability in what you’ll pay. Lowering your fees, therefore, starts with choosing the right broker.
Do your research and understand exactly how much money your broker will charge for each bitcoin purchase. Some demand higher fees if you purchase cryptocurrency using a credit card, while others reduce their fees when you use a bank account. Knowing these nuances will help you choose a reputable, quality broker who, again, will keep more currency in your wallet.
Consider an Exchange Platform
The alternative to a broker is an exchange platform where you can purchase and trade bitcoins yourself. These require certain fees as well, including those for:
- Trading spreads
- Margin fees
It’s All in the Details
As with brokers, some exchanges waive deposit and withdrawal fees so you can move your bitcoins without being charged. These models make regular trading activities cheaper, but keep in mind each exchange offers its own benefits and drawbacks.
Some, for instance, only waive the fees if you pay with a bank wire, while others prefer credit cards because they offer protection in the form of chargebacks. The same advice applies: do your research and choose the exchange platform that suits your preferences while also offering the lowest fees possible.
Watch for Fraudulent Fees
As bitcoin continues to grow in popularity (conservative estimates suggest over 150 million people around the globe currently use cryptocurrency), unregistered brokers selling these currencies also increase. Many run scams in which they charge excessive fees in exchange for what they promise will be substantial crypto payouts. The profits are not real, however, and these fraudsters disappear once you stop paying the fees.
How can you spot these scams? No program, individual, or automated system can guarantee high profits on bitcoin just because you pay «service fees» or other charges. The goal is to encourage you to pay an upfront deposit followed by ongoing fees; the people behind these scams profit while you suffer. Keep in mind you should never:
- Pay for bitcoin advice if a party is not registered with a U.S. regulating body
- Pay unregulated individuals you have never met or who don’t operate within the United States
- Deposit money into a platform not registered with the CFTC (you can check their registration status before depositing)
Watch the Merchants You Use
A growing number of merchants use software that reduces currency fees for themselves and consumers. Many times, these merchants allow you to pay using your preferred cryptocurrency and wallet; this convenience means you can use bitcoin with greater ease in your daily life.
If you have a question about a merchant’s crypto platform, ask them. They should be happy to provide information so you understand the potential for fees (if any) in your transaction. If they don’t readily answer your questions, you might want to move on to a more transparent merchant.
Paying with bitcoin doesn’t have to be riddled with fees. Do your homework and take your time. That way, you’ll avoid many of the most common currency charges and ensure safe transactions. And if you have additional questions, reach out. To learn more about using bitcoin for your purchases, contact ForumPay today.