A Guide to Coinbase Fees

The easiest way to trade cryptocurrencies is through an exchange. There are hundreds of exchanges, but many are of dubious quality—in an unregulated market, trust is everything.

One popular, trusted network is Coinbase, a cryptocurrency exchange headquartered in San Francisco. Since it opened doors in 2012, it has attracted more than 13 million users and last year made over $1 billion dollars in revenue. Funds held on Coinbase are generally insured.

Coinbase is split into two parts. The first, known simply as “Coinbase,” functions as a cryptocurrency wallet and brokerage service—you buy and sell cryptocurrencies with Coinbase itself using fiat currencies (i.e. non-cryptocurrencies, like US dollars and British pounds). The second is Coinbase Pro, an exchange for advanced users, on which you can buy and sell cryptocurrencies from other users.

Of course, these services all come with a variety of different fees, which can quickly become confusing and expensive. In general, fees depend on where you’re based, and the payment method you’re using. Fees are four percent at the high end, however, if you’re buying cryptocurrencies through a bank transfer they can be as low as 1.49 percent.

Wallet service

Free service

Coinbase offers a free cryptocurrency wallet. These support any of the cryptocurrencies supported by Coinbase (such as Bitcoin, Ether, and XRP). Coinbase doesn’t charge you if you want to transfer cryptocurrencies between Coinbase wallets.

Transaction fees

If you transfer crypto off the Coinbase network, then you will have to pay transaction fees to cover the cost of adding your transaction to the blockchain. (The transaction fees pay the ‘miners’ who validate the transactions on the blockchain.)

For instance, if you wanted to buy a cup of coffee using Bitcoin from your Coinbase wallet, it’s likely you’d incur transaction fees for the purchase. Coinbase provides an estimate of the fees, but the final cost is sometimes different than the actual fees.

Buying and converting cryptocurrencies using Coinbase

You can buy cryptocurrencies directly from Coinbase, and you can also convert into other cryptocurrencies. In both cases, you will have to pay Coinbase a fee. (ie just like you might have to pay a conversion fee to exchange US dollars into pounds, you’ll also have to pay Coinbase a fee if you want to convert Bitcoin into Litecoin).

Coinbase fulfilling all its orders on Coinbase Pro, the trading platform tied to Coinbase. The exchange rate for cryptocurrencies on Coinbase comes by adding a “margin,” or “spread,” to the Coinbase Pro exchange rate. The spread for digital currency purchases is about half a percent. This margin is used to cover their purchase of cryptocurrencies using lended money. This spread depends upon market trends, though, as well as the change in price between the time the Coinbase Pro price was quoted and the transaction was processed.

There is also an additional fee, called the “Coinbase fee,” which is charged as either a flat fee or as a percentage of the transaction. These vary upon location and payment method. The Coinbase fee is mentioned before any transaction, but the margin isn’t, so you won’t be getting a perfect rate on your transactions.

Transactions can be rejected by Coinbase if the order size exceeds the maximum order on Coinbase Pro, or if the server is too slow to process the transaction. If the Coinbase Pro rate is unavailable, then the transaction will also not be processed.

Buy/sell transactions

The Coinbase fee is the greater of either a flat fee or a variable, region dependent percentage. The flat fees are as follows:

The flat fee will generally apply for bank transfers, as the percentage charge is lower for these. However, if you’re buying using a credit or a debit card, the flat fee will likely be lower than the percentile one so it will not be applied. This is because the credit card rates are higher, resulting in a higher fee than the flat fee.

You might be buying cryptocurrencies as a long term speculative investment, on the belief that you will get a strong return over time. Another way of achieving this would be to put your cash in a savings account or in an automated investment portfolio. 

Table of fees for purchases

Currency conversions on Coinbase simplify the process of switching between two different cryptocurrencies, as it can be completed within a single transaction. For example, instead of selling your bitcoin on an exchange to free up money to buy Ethereum, you can directly change the currency from Bitcoin to Ethereum within Coinbase.

The spread margin for digital currency conversions is up to two percent. As an additional feature for American users, US dollars can be treated as a digital currency, meaning you can buy and sell cryptocurrency without paying a larger transaction fee.

Currency conversions are important when it comes to trading cryptocurrencies against each other. If you’re trading, you want to maximize your profits: Conversion fees cut into these profits.

Coinbase offers support for proof of stake, but as of February 2020 you will need to hold a specific currency on the network, Tezos (XTZ). If you choose to stake your currency, then Coinbase will take a 25 percent commission on any earnings you make with the cryptocurrency. Currently, staking Tezos on Coinbase will give a five percent annual return, which takes into account the commission drawn by Coinbase. This rate is subject to change depending on the number of participants in the staking process. And, of course, this all depends on the value of Tezos, which is highly volatile.

Selling fees

If you want to take your currency off the network in exchange for your own fiat currency, Coinbase will take a 1.49 percent commission. In other words, you would lose money if you bought a cryptocurrency then sold it at the same value, since the fees would cost you both when you buy the currency and sell it. Therefore buying will only be profitable if the currency appreciates in value.

If you have managed to turn a profit on your cryptocurrency, then you could earn significant amounts of money. Profits from cryptocurrency trading could be reliable to capital gains tax. Working out how much tax you’ve got to pay can be complicated, as these are not the typical earnings you’d make from a nine-to-five job. There's a useful guide on crypto taxes here.

Avoiding fees: Coinbase Pro

Coinbase Pro is the slightly more complicated trading version of Coinbase. While it may be a little intimidating, the platform is very useful for reducing fees on Coinbase. If you have a Coinbase account, then you already have access to Coinbase Pro so you won’t have to sign up separately.

Withdrawal fees

Coinbase doesn’t apply withdrawal fees, however, there are network fees (paid towards miners) that are dependent on how busy the network is. These fees can be avoided if you withdraw your funds via Coinbase Pro. If you go into the ‘My Wallets’ of Coinbase, you can transfer funds from Coinbase to Coinbase Pro then withdraw from Coinbase Pro, without having to worry about fees.

Buying fees

Coinbase Pro doesn’t charge a fee when you add money to your account.

Trading fees

Coinbase Pro uses a system called maker-taker, which determines trading fees. As a maker, you create offers that are added to the order book, either as a buyer or as a seller. Meanwhile, as a taker you remove part of the order book by taking a buy or sell order. These trades are instantaneous, with fees between 0 and half a percent. This is considerably lower than digital currency conversions, which can have fees as high as two percent.

The bottom line

Coinbase has a lot of fees that can eat into any money you’re making, especially if you trade regularly or with significant amounts of cash. There are alternatives to the platform that provide strong returns without debilitating commission rates. The crypto market is also volatile—it is a much better strategy to spread your investments across a variety of asset classes.

Cryptocurrencies, though, can certainly feature in your investment portfolio: you just have to work how. It’s a good idea to create a plan, and to think in advance about the investment strategy that best meets your needs. Wealthsimple’s Invest for instance, allows you to choose between a variety of different assets with varying levels of risk.