Previous reports of improved oral reading performance for dyslexic children but not for regular readers when between-letter spacing was enlarged led to the proposal of a dyslexia-specific deficit in visual crowding. However, it is in this context also critical to understand how letter spacing affects visual word recognition and reading in unimpaired readers. Adopting an individual differences approach, the present study, accordingly, examined whether wider letter spacing improves reading performance also for non-impaired adults during silent reading and whether there is an association between letter spacing and crowding sensitivity. We report eye movement data of 24 German students who silently read texts presented either with normal or wider letter spacing. Foveal and parafoveal crowding sensitivity were estimated using two independent tests. Wider spacing reduced first fixation durations, gaze durations, and total fixation time for all participants, with slower readers showing stronger effects. However, wider letter spacing also reduced skipping probabilities and elicited more fixations, especially for faster readers. In terms of words read per minute, wider letter spacing did not provide a benefit, and faster readers in particular were slowed down. Neither foveal nor parafoveal crowding sensitivity correlated with the observed letter-spacing effects. In conclusion, wide letter spacing reduces single word processing time in typically developed readers during silent reading, but affects reading rates negatively since more words must be fixated. We tentatively propose that wider letter spacing reinforces serial letter processing in slower readers, but disrupts parallel processing of letter chunks in faster readers. These effects of letter spacing do not seem to be mediated by individual differences in crowding sensitivity.