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The Betfair Premium Charge; why it matters and what you can do about it?
Will you lose your profits to the Betfair Premium Charge? Keep track of your betting returns and understand the Betfair Premium charge before it’s too late.
Published on 14 October 2018
Updated on 14 October 2018
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You may have heard stories about the good old days of Betfair. Those glorious days when the betting exchange was young. Internet punters celebrated those early users and many enthusiastic sports bettors understood betting exchanges made a lot of money.
Many of us missed this great time...
In those early days, Betfair always charged commissions on winning returns, but they did not require successful traders and exchange users to pay an additional fee; the Betfair Premium Charge.
Some may see this as a stealth tax, which robs you of your income before you get to receive it.
However, if you’re objective for a moment, it could be a financial recognition of your long-term success rather than an extreme negative.
Yes. I know losing money you were not expecting to lose is never good fun.
If you’re more successful at trading the betting exchange markets than others, you will have the ability to make more money, but you must also pay a fee for the privilege.
After all, isn’t it better to have Premium Charge problems rather than problems losing a vast number of your trades or bets.
How do you qualify for the Premium Charge
There are some good references on this, so perform a quick search to find deeper explanations, but in brief you need to answer yes to all three of the following questions before Betfair recognises that you should pay the Premium Charge:
1. Have you bet or traded on more than 250 markets over the lifetime of your account?
If this first question is ‘no’ then you do not need to go any further…Otherwise…
2. Is your account in profit over the lifetime of your account?
You must check the full life of your Betfair account and not just your current account balance. How much money have you made on Betfair?
Betfair track everything, so they know your real numbers. If you have a lot of profit within your account now, but you’ve really lost a lot of money over the life of the account. You have no need to be concerned about the Premium charge for the moment.
3. Are the total Betfair commissions you have paid over the life your account less than 20% of your total life Betfair profits?
So, to make things easy, if your lifetime Betfair profits were £10,000 and your lifetime commissions amounted to less than £2,000. You would have to answer yes to this question.
Now you know if you’re eligible to pay extra for winning.
Why all the anger against Betfair?
When you pay someone more money for nothing, it will ultimately affect your long-term winnings.
You must win more, to ensure you make the same level of gains when you subtract the Betfair Premium Charge.
This is where we can quickly become angry, when it seems that we’ve done all the hard work; found a betting system or trading system that work, and someone takes our hard work away from us and we can do nothing about it.
This could be soul destroying, but if you know that this is a possible scenario before you start, we can discover the worst-case scenario and find a good approach to reduce our liabilities.
The diagram below shows the betfair premium charge and how it would affect your winnings. You can see the big drop at the premium charge levels and you can visualise how this can affect your take home income from sports trading.
We all hope and dream about the good times and we dream about giving up the day job and driving expensive cars without a care in the world.
As we all know, money rules the world and as we dream of making fortunes through sports gambling or trading, the owners of the platforms are all dreaming of the same thing.
The easiest way to make this dream come true for the betting platforms, is to allow people to bet freely with incentives. Many people take advantage of the great bonuses and promotions, but on the other hand many people often lose money.
This is the ideal scenario for the bookmaker, so we’re trying to help you make the most of your successful betting opportunities.
When all is said and done the bookmakers and the sportsbooks require losing players for their profits.
Profits allow the providers to maintain the betting and the trading platforms that we all use every day.
Taking advantage of bookmaker and betting exchange promotions is one thing, but not understanding how the premium charges are going to impact you is another thing that will hurt your pocket.
The Premium Charge can rapidly grow
If you’re ultimately successful you may get hit by yet another Premium Charge, which is applied when an account is able to remove £250k in profits from betfair.
At the time of writing this special Premium Charge amounted to a massive 60% of trading profits above the £250k!
This is a significant amount of money for any aspirational professional bettor and is a good yard stick to measure yourself against.
Apparently, the Betfair Premium charge is only applied to a small 0.1% of the existing customer base, so you will have to work hard and understand how to make money from the platform to reach that level.
Now we all enjoy betting here, so the small 0.1% of the Betfair customer base that is in fact withdrawing significant profits from the exchange and not turning the winnings over within Betfair is probably just what they do not want to happen.
Think about it. Casinos do the same thing, they invite you on to their tables to play poker and a large pot of money is built up. The poker player battle against each other to win the pot, but the original buy-in contains a fee, which is retained by the Casino.
The Casino owns the table (physical or virtual) and runs the event, so they also want a piece of the action by including a fee within the buy-in.
Betfair is operating in a similar fashion. Their principle method of making money is from the commissions charged on the winning bets, which means they take a cut of every winning bet. This means the winning bettors have their returns reduced and the losing bettor loses their stake.
Now, if the winning player is continually successful and they do not remove their funds from the pot, but continually turn the money over Betfair is most likely happy and charges the usual commissions every time the money is turned over.
Betfair customers are financially rewarded to place more bets and maintain the money within the exchange. This way the commission is continually charged against the winning punters as the same pool of money is traded across various exchange markets.
Betfair reduces the commissions that will impact you by providing you with Betfair Points.
What are Betfair Points?
Betfair points are a recognition of the number of times that you decide to turn your money over within Betfair?
How do you turn money over within Betfair?
That’s easy, you continue to place bets with money within your account. This means that every time you deposit money, you can bet that money on the betting exchange.
If you place many bets, you get more points and the good thing for people that are interested in Betfair points; you receive Betfair points if you win or if you lose your bet.
So, you’re being paid (in point Betfair points) to place more and more bets.
Why are Betfair points important?
Betfair points translate to reduced commission charges on your account. The more commission charges are reduced, the less you will lose from your Betfair winnings.
Betfair has a good Betfair Points explanation, which provides more detailed information on exactly how these charges may impact your pocket.
What can we do to get workaround the charges?
Bookmakers, betting exchanges and punters all need each other, but we’re all operating against each other every day.
This uneasy alliance means that you’re unable to make money without becoming aware of the different pitfalls along the way.
Now just imagine if you could understand how your future profits could be affected by the Betfair premium charge.
The Betfair information lets you see your current premium status, but it does not give you a good visualisation of how things might be different for you in the future.
If you could track the different elements and work out how much you can understand the process and decide on your next bets, which will help you to understand if you need to turn your bets over more or just accept the premium charge on your account balance.
This type of tool would make things easier to navigate and understand how the charges could affect you.
Betfair Premium Charges and Betfair Points
It’s an interesting scenario, but using betfair as you preferred trading platform means that if you’re successful over the long-term this means that you’re in a position to incur the premium charges.
Please keep in mind that reducing this liability does not mean that your next exchange bet, or trade is any more likely to be matched by another user. You have only reduced your Betfair Premium Charge liability, but increased your risk by placing more trades/bets to increase your Betfair Points.
From a customer service perspective, it’s unclear as to why Betfair continues to charge the Premium Charge on its more successful customers.
There’s an obvious reason why the most popular betting exchange may feel like they cannot remove the Premium Charge, as they want to make a profit from successful users who remove money from the closed system and therefore reduce the transactions circulating around the system and reduce profitability.
As with any state mandated tax; Betfair Premium charge is unlikely to be removed entirely. Changes may be made around the edges, but once implemented it’s very difficult for governments and businesses to wean themselves off new income sources.
Governments tend to increase their spending relative to the income, so once collected it’s almost certain it will never be withdrawn entirely.
This is most likely the same reason why Betfair persists with the Premium charge. They have a dominate market position and their more successful customers are very unlikely to go to another betting exchange permanently.
This is because there is not as much liquidity within some of the other exchange platforms.
Therefore, Betfair exchange players placing bets and trades may become more and more successful but must understand they will share above the norm winnings with the exchange platform.
Although, I can understand why a business chooses this approach, as it’s the easiest way to ‘encourage’ successful players to leave the platform, but it’s ultimately short-sighted.
I see the Betfair market as one big connected loop, as the more people they bring into the system would allow them to generate more revenue (and therefore profits) from the money that will be turned over via exchange transactions within the system.
There must be different mixes between backers and layers, which may ultimately, reduce the Betfair’s upfront profits, but it should allow them to attract more players to the market.
If Betfair continued to praise their extremely profitable players in the public and social media, it would spur people on to try and reach that pinnacle and see if they could match the professionals.
More people inspired to act and learn more about the world of sports betting would encourage people to join the Betfair exchange ecosystem, which would create more turnover and generate more commissions from the players.
Or they could continue to charge the Premium Charge, as it’s easier revenue and it encourages the sucessful people to migrate awway from their platform, which may be their intention.
One choice is about abundance of opportunity and working with the sports betting community (and getting paid for the privilege) and the other choice is more concerned with short term gain at the expense of the community good will.
The 60% Premium Charge is large and to make the same amount from the same level of transactions would require placing more money, which might not work in terms of liquidity, as there may not be enough people to accept the trades.
The reality is that the number of people willing to place or accept a bet on betfair can only match the total amount of money within the system.
Therefore, reducing funds and continuing with Premium Charge may cause long-term harm for the Betfair business model.
Without running the Betfair numbers, it probably does make some short-term sense to take money from the winning players until they leave the platform, as it removes some of their winnings as profits now (rather than future commission payments later).
How can you evade the Betfair Premium charge?
I would love to say I’ve found a way for you to have your cake and eat it, but unfortunately, Betfair is the owner of the exchange platform and they create the rules.
If you want to meet their terms and conditions of use we will have to live with the rules, stop betting altogether or migrate away from the platform.
So, the best approach is to visualise how this fee could affect you and learn how you could minimise its impact in the future.
How can you reduce the Betfair Premium Charge (without getting shutdown)?
Using other betting exchange platforms
We talked about this above, but in reality you only have one viable option; Betdaq.
The Betdaq exchange is good, but now it does not offer enough long-term liquidity outside of the more popular betting and trading markets. It’s certainly possible to build your trading within this environment, but it is certainly not the perfect option to compete with Betfair.
Increase your activity and Betfair transactions
You can make use of the Betfair Points to reduce your commission charges, it’s playing into the hands of the exchange by increasing the number of transactions on markets.
However, you would only increase your transactions where there is enough liquidity to support it.
At least that would create an optimum number of trades on the platform and reduce your commission and Betfair Points liability whilst trying to balance this downside with the potential winning upside.
Yes. I know, it’s not perfect, but at least you have a picture of the optimum betting levels, which may help you to balance the negative with all the positives that the Betfair betting exchange has to offer!
Tags: betfair, odds
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