So I’m guessing that you were looking to buy cryptocurrency through the popular exchange Coinbase but are wondering if it’s worth it. Should you use Coinbase? Or is Coinbase a ripoff that you should avoid. After all there are alternatives to Coinbase out there, which I will go over later on, so it’s not like you are forced to use this particular exchange.
The first thing I want to talk about is why some people are calling Coinbase a rip off. The reason is because of the high fees that Coinbase charges when purchasing and selling the various cryptocurrencies that they have available for exchange, which include Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
There is a reason that Coinbase charges such high fees and I will go over the reason shortly, but first I want to explain how the fees work and how high they really are.
A Look at Their Fees
Coinbase charges very high fees compared to most exchanges. This is the bottom line here.
I’m not going to go into much detail on this because, honestly, it’s very confusing and Coinbase has an entire page dedicated to how they calculate their fees according to where you live for each payment method. You can read it here if you wish, but I’ll give you an overview.
They have two methods in which they calculate the fees that you will have to pay to use their exchange services.
Under method one they charge a percentage based the that is dependent on where you live and what type of payment method you are using. Just to give you an example, if you live in the US and are looking to pay with a bank transfer or from your Coinbase USD wallet, you will have to pay a 1.49% fee. And if you are going to pay with a credit/debit card you are going to have to fork over a 3.99% fee…
|U.S. Bank Account||1.49%, with a $0.15 minimum|
|Coinbase USD Wallet||1.49%|
Under method two you will have to pay a 1% variable fee based on the size of your transaction that is also dependent on where you live. Depending on your payment method you might also have to pay a 2.49% fixed fee on top of that.
I’m honestly not sure exactly how Coinbase determines which method it will use to come up with the fees it charges you… All I know is that they charge a heck of a lot. If you are going to be paying with a credit/debit card you are going to get hammered with the fees. From the times that I’ve bought crypto through Coinbase with my credit/debit card I’ve been charged the 3.99% fee along with the 1.49% fee when buying with a bank transfer (I live in the US by the way).
Also, if you sell your cryptocurrency and go to withdraw your money you will be charged a 1.49% fee. So you get hit going both ways.
*You may also get charged additional fees from your bank, but this is something that is not under Coinbase’s control. I have never experienced this by the way.
The Cost of Convenience and Simplicity
The reason that Coinbase is fees are so high is simple. This is the cost of convenience and simplicity. There is not an easier, more simple, or more convenient exchange out there then Coinbase and this user-friendliness comes with a cost.
There aren’t many exchanges out the that even give you the ability to purchase cryptocurrency with the fiat money, such as USD and EUR. There are a lot of complications that come along with this and most exchanges don’t even want to have to deal with it. But Coinbase does deal with this of course and they take it to another level by making the exchange platform very easy to navigate and use.
Purchasing bitcoin, for example, is as easy as going to the Buy/Sell menu, clicking on buy and bitcoin, adding a method of payment, and entering the amount you want to purchase. Depending on what payment method you use, you can end up with bitcoin instantly in your Coinbase wallet that is provided to you on the exchange.
Of course you have to go through the process of creating an account in the first place and verifying your payment method, but overall the process is very simple and straightforward.
They Have Good Support Too
It is also worth mentioning that Coinbase has some of the best support in the business, probably the best. I wrote an entire post about how you can contact Coinbase support that you can read if you wish to learn more, but the most notable support service that they provide is there phone service, where you can actually call them and talk to a live person. This is something you do not see much in this industry nor do you see much in any industry anymore.
Are Their Fees Reasonable?
Okay… So they have high fees and the reason for these high fees is the quality of service that they provide. But for these high fees really reasonable? This is a question that is very debatable.
In my opinion they could definitely lower the fees some. Coinbase is making a heck of a lot of money and I think they could easily make do with charging less fees. Unfortunately they don’t have all that much competition, because as I said most exchanges don’t want to deal with fiat money, and because of this lack of competition they have the increased ability to charge fees that they see fit, even if they are higher than they need to be.
This is something that I would love to hear other people’s opinions on. So if you do have an opinion on this you can leave a comment below this post when you’re done reading it.
If you think their fees are unreasonable and want to avoid them then here is a great alternative that you can use…
A Great Alternative to Avoid The Fees
The alternative exchange that I would suggest using if you don’t want to use Coinbase is GDAX. GDAX is actually owned by Coinbase but it is there more professional exchange platform. This is the platform that pros and institutional investors will be using. It offers pretty much all of the same services and features and then some, all with lower fees… Much much lower fees.
The only real downside to using GDAX instead of Coinbase is that it is slightly more confusing and you are not able to pay with credit/debit cards, which means that you cannot buy cryptocurrency instantly. What you have to do is find your account on GDAX first and then you are able to purchase and make trades.
When I say that GDAX is more confusing than Coinbase it’s nothing to worry about for most people. It provides a more complex price chart along with some technical analysis tools and in order book that can be used to analyze the market and zero in on good trading opportunities. But you do not have to use all these different features if you do not want to. You can go into GDAX and by at the current market price and leave it at that. So it might look more complicated and it is slightly, but it’s nothing that anyone can’t handle.
If you want to learn more about the differences between the two exchanges you can read my post on GDAX versus Coinbase here.
So Should You Use Coinbase or Not?
This is entirely up to you. I know after reading this post it may seem that I do not like Coinbase but that is not true. They do provide a great service and are a great way for newbies to buy their first cryptocurrencies. In fact, Coinbase is the exchange I started using when I first ventured into the cryptocurrency world.
Now when I am buying or selling Bitcoin, Ethereum, etc. with fiat money I used GDAX, but Coinbase is still a good pick and it all depends on how simple you want the process to be. If you are completely new to all of this and wanted to be as simple as possible then Coinbase is going to be your better choice.
You can read my full review of Coinbase here for more info on everything.
Anyways, I hope this post help you out some and provided some valuable insight into this topic. If there is anything that I didn’t cover and you have questions on please leave them in the comments section below. I will get back to you soon 🙂