Got some pocket change you want to throw at crypto? It won’t go as far on Venmo.
Venmo and its parent PayPal Holdings Inc. alerted their users earlier this week that they’re changing their fees for crypto transactions under $200. While the companies said the pricing adjustments were just an effort to provide investors with more transparency, a closer look shows any customer making transactions of $100 or less will be a lot worse off.
The online payment platforms started offering customers the ability to buy, sell and hold four cryptocurrencies (Bitcoin, Ethereum, Litecoin and Bitcoin Cash) last year. Since then, Venmo’s cryptocurrency wallet has nabbed 18% of global market share for active wallets with payment features, making it the third most popular site as of late last year. PayPal was No. 1.
Venmo and PayPal currently charge 50 cents for any trades under $25, 2.3% of the transaction for trades between $25 and $100 and 2% for those between $100 and $200.
The new fees, effective March 21, will charge 99 cents for trades between $5 and $25, $1.99 for trades between $25 and $75 and $2.49 for those between $75 and $200. If you do the math, trades from $130 to $200 will become cheaper, but anything below that amount will become more expensive.
The new fees will hit smaller trades especially hard. A $50 transaction will now cost $1.99 instead of $1.15, or an increase of more than 70%, and a $25 transaction will cost $1.99 instead of 58 cents, a jump of 243%.
The average crypto trade across all platforms tends to be around $250, according to one report, but many users trade well below that, too.
It’s hard to find a good reason for anyone making smaller transactions to do so with Venmo or PayPal. The transaction fees on crypto exchanges like Binance tend to be lower, and there are no fees when you trade cryptocurrencies through online brokerage firm Robinhood.
In addition to higher costs, there are more limitations on the payment apps, where you can only buy four types of crypto and you can’t move your digital coins to another wallet.
Venmo is trying to capture business by offering convenience: They give existing customers who want to dabble in crypto an easy way in, so they don’t have to go through the trouble of opening up a new account on a crypto exchange, says Igor Prejic, author of “Blockchain Babel.”
Even if Venmo and PayPal users are crypto novices, the extra ease isn’t worth the price.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Read full story on Bloomberg