# Transaction Fees

When you borrow or lend, you are trading fCash on one of Notional's liquidity pools. The liquidity providers in that pool charge a transaction fee on your trade. The transaction fee is applied to the interest rate of your loan. If you are lending, you will get a slightly lower interest rate and if you are borrowing you will get a slightly higher interest rate.

### Fee rate

The transaction fee charged is a percentage of the total interest before the fee is applied. Currently, the fee rate is 8%. So if the pre-fee interest rate is 3.75%, the fee would be 0.3% (3.75% * 8%).
This means that the post-fee lending rate would be 3.45% and the post-fee borrow rate would be 4.05%.

### Lender fee example

Here is an example of transaction cost for a lender assuming a 0.3% transaction fee.
cash = 1,000 USDC
timeToMaturity = 0.5
pre-fee interest rate = 3.75%
post-fee interest rate = 3.45% (3.75% - 0.3%)
pre-fee fCash = 1000 * e^(0.0375 * 0.5) = 1,018.93
post-fee fCash = 1000 * e^(0.0345 * 0.5) = 1,017.40
total fee = 1.53 fCash
In this example, the lender's fee is 1.53 fCash. This means that they will receive 1.53 USDC less in interest at maturity than if there had been no fee. This fee is split between the liquidity providers and the protocol.

### Borrower fee example

Here is an example of transaction cost for a borrower assuming a 0.3% transaction fee.
cash = 1,000 USDC
timeToMaturity = 0.5
pre-fee interest rate = 3.75%
post-fee interest rate = 4.05% (3.75% + 0.3%)
pre-fee fCash = 1000 * e^(0.0375 * 0.5) = -1,018.93
post-fee fCash = 1000 * e^(0.0405 * 0.5) = -1,020.46
total fee = 1.53 fCash
In this example, the lender's fee is 1.53 fCash. This means that they will need to pay 1.53 USDC more in interest at maturity than if there had been no fee. This fee is split between the liquidity providers and the protocol.

### Time to maturity impact

The absolute size of the transaction fee for trading fCash will change depending on the time to maturity even though it stays the same in percentage terms. If you are lending for long periods of time, the fee will be higher, and if you are lending for short periods of time the fee will be smaller.
For example, consider a lender who is lending for six months vs a lender who is lending for one year.
// Lending for six months
cash = 1,000 USDC
timeToMaturity = 0.5
pre-fee interest rate = 3.75%
post-fee interest rate = 3.45% (3.75% - 0.3%)
pre-fee fCash = 1000 * e^(0.0375 * 0.5) = 1,018.93
post-fee fCash = 1000 * e^(0.0345 * 0.5) = 1,017.40
total fee = 1.53 fCash
// Lending for one year
cash = 1,000 USDC
timeToMaturity = 1
pre-fee interest rate = 3.75%
post-fee interest rate = 3.45% (3.75% - 0.3%)
pre-fee fCash = 1000 * e^(0.0375 * 1) = 1,038.21
post-fee fCash = 1000 * e^(0.0345 * 1) = 1,035.10
total fee = 3.11 fCash
The lender who is lending for one year pays a fee that is ~2x greater than the lender who is lending for six months even though the transaction fee is 0.3% in both cases. Transaction fees scale linearly with time to maturity. As fCash gets closer to maturity, the fee gets closer and closer to 0.