Image handling in WordPress

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I have been told that uploading a image larger than what you stipulate in media settings penalises your website load time. I don’t understand why. Yes the larger image will take more storage on server, but what user downloads is what is set in media settings. E g say I upload 2048x 2048 image. And set in media settings, large to be 1024 X 1024. So isn’t what the user downloads much smaller than what I uploaded? Grateful for clarification.

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