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LIVING IN GERMANY

Why bank customers in Germany are facing higher fees

Banking in Germany is known for being costly for customers. But a consumer rights group has found evidence of fee increases across the board. Here's what's happening - and why.

Why bank customers in Germany are facing higher fees
Which German bank is the most cost-effective for you? Photo: picture alliance/dpa/dpa-tmn | Zacharie Scheurer

Is free banking becoming something of the distant past? It appears so. Consumer research organisation Stiftung Warentest has found that German banks are cranking up fees to compensate for low interest rates.

Amid legal action to prevent banks from exploiting their customers, the consumer group found evidence of consistent fee increases across the board, and a dwindling number of cost-effective services.

Anyone who lives in Germany will be aware that many accounts and services with German banks have long been pricey, with charges linked to cash withdrawal from ATMs outside of your banking pool, use of credit cards, and current accounts.

READ ALSO: What to know about starting your personal banking in Germany

Germany still has a high cash-based economy, as the majority of payments are still done with physical money, meaning that aspects of the industry have taken longer to modernise. 

Your banking pool – the set of banks from which you can withdraw cash for free – depends on the partner agreements that your bank has with others. The three major German banks – Deutsche Bank, Commerzbank and HypoVereinsbank – all allow free withdrawals from their ATMs for customers of any of the three, but this is a fairly recent change.

Photo: picture alliance/dpa/dpa-tmn | Benjamin Nolte

And as charges decline for this service, fees are being levied in other areas to ensure rising profits in an often unstable sector, consumer groups have found.

Looking into giro accounts (similar to checking accounts or current accounts) offered by German banks, Stiftung Warentest found that taking out an account for free and without unnecessary conditions attached is significantly more difficult than it was in previous years. 

Heike Nicodemus, a finance expert for the DPA, commented on this trend, saying that “it is striking that fees are being raised or introduced, and free accounts are having conditions imposed on them for the first time – for instance, a required monthly receipt of money”.

READ ALSO: Why a German court decision means you could be entitled to compensation from your bank

Only 14 free accounts with no conditions

In a study of 380 models from 152 banks and savings banks, researchers located just 14 accounts which were both free and had no conditions attached, down from 20 accounts one year ago. According to the data, 10 of these cost-free models are at branched credit institutions, whilst the others are at direct or online banks. 

By ‘free’ accounts, Stiftung Warentest means accounts with no base fee, no charges for bank statements, bookings, Girocards or withdrawing from ATMs in your own pool of banks, and no conditions requiring regular receipt of any specific sum of money. 

Experts from the consumer organisation stated that, in their view, any account which costs less than €60 is probably cost-effective, given that this pays for banks to process bookings, provide Girocards and physical ATMs and secure technology for online banking. A total of 90 accounts on offer across the country offered accounts for this price level or under, but the number is shrinking every year. 

There have been recent disputes about the unethical pricing methods of major German credit institutions. Fee information is often concealed from customers on their websites, and price increases are being hidden in less noticeable areas as ‘surcharges’, as evidenced by price hikes in paper bank transfers and credit cards in recent years. 

Court action over fee hikes

These disputes have escalated into legal and legislative action. Recently, the Federal Court of Justice set strict limits on fee increases, meaning that banks now have to receive consent from their customers before changing their terms and conditions. A court ruled in April that the clause stating that financial institutions may assume tacit consent from customers if they have not objected to fee changes within two months “disadvantages customers significantly”.

Financial institutions have been upping fees for years now. Low interest rates across Europe are putting them under pressure to make up for shortfalls; on top of this, financial institutions have to pay 0.5 percent negative interest when parking money in the European Central Bank. Although there are exemptions for higher sums, the sector is still complaining of expenses along the lines of billions of Euros. 

To add to this, as society becomes more digitalised, ever more bank branches are closing down. According to statistics by the German Central Bank, the number of physical branches this year dropped by 9.6 percent from the previous, taking the overall sum to 24,100. A massive 2,567 branches were closed within that period. 

Germany’s banking system is based on three different pillars, including private commercial banks, public savings banks and co-operative banks. Private commercial banks represent the largest segment when it comes to assets, totalling around 40 percent of the overall sum.

The good news is that getting a German bank account is a relatively streamlined service for residents (including foreigners), even if you do risk being affected by these increasing fees. If you have a residence in Germany, Austria or Switzerland you can open an account at almost all of Germany’s major banks. 

However, the bank account rejection rate for non-residents is high, meaning that you might be better off opening a bank account in a different European country, as Germany’s membership of the Single European Payments Area (SEPA) means that euro transfers across countries are just as cheap and quick as within a single country. 

READ ALSO: Germany’s Commerzbank to cut 10,000 jobs and close 340 branches

Translation by Antonia Harrison

Member comments

  1. Hmm, the co-operative banks sounds similar to the credit unions here in the States; both serve and help their communities, offer lower rates and fees for loans, little to no fees on ATM withdrawals or account maintenance (to name a few), all members have a say/vote on the co-op’s/union’s operations, and of course putting people over profits, unlike big banks where most people are considered as an afterthought. Being a long-time member of a union myself, I gladly tell anyone to join a credit union if and when possible.

    If you think the fees at banks are bad though, some pre-paid debit cards here actually charge you for calling their customer service; it’s a small fee like 25 or 50 cents per call which is not only insane, but should be illegal and discourages people from calling should they have an problem, while others charge monthly maintenance fees, or minimum amount that you have to deposit otherwise it’ll deny any lower amount; one such card I used long ago required a minimum $23 (17 euros) deposit, on top of a $3 (2 euro) fee, and then another $3 for a monthly maintenance fee too, so yeah these cards are very predatory, and make many pay a pretty penny for the privilege of a debit card.

    So yeah, if I had to rank the three the credit unions/co ops would be leading the pack, banks 2nd, and pre-paid cards would be dead last, as those cost way more than their actual worth. Just my two cents/experience.

  2. Meant to say $23 (17 euros) in last comment…hope the Local adds an edit button for comments in the future.

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LIVING IN GERMANY

Living in Germany: Battles over Bürgergeld, rolling the ‘die’ and carnival lingo

From the push to reform long-term unemployment benefits to the lingo you need to know as Carnival season kicks off, we look at the highlights of life in Germany.

Living in Germany: Battles over Bürgergeld, rolling the 'die' and carnival lingo

Deadlock looms as debates over Bürgergeld heat up 

Following a vote in the Bundestag on Thursday, the government’s planned reforms to long-term unemployment benefits are one step closer to becoming reality. Replacing the controversial Hartz IV system, Bürgergeld (or Citizens’ Allowance) is intended to be a fair bit easier on claimants.

Not only will the monthly payment be raised from €449 to €502, but jobseekers will also be given a grace period of two years before checks are carried out on the size of their apartment or savings of up to €60,000. The system will also move away from sanctions with a so-called “trust period” of six months, during which benefits won’t be docked at all – except in very extreme circumstances. 

Speaking in parliament, Labour Minister Hubertus Heil (SPD) said the spirit of the new system was “solidarity, trust and encouragement” and praised the fact that Bürgergeld would help people get back into the job market with funding for training and education. But not everyone is happy about the changes. In particular, politicians from the opposition CDU/CSU parties have responded with outrage at the move away from sanctions.

CDU leader Friedrich Merz has even branded the system a step towards “unconditional Basic Income” and argued that nobody will be incentivised to return to work. 

The CDU and CSU are now threatening to block the Bürgergeld legislation when it’s put to a vote in the Bundesrat on Monday. With the conservatives controlling most of the federal states – and thus most of the seats in the upper house – things could get interesting. Be sure to keep an eye out for our coverage in the coming weeks to see how the saga unfolds. 

Tweet of the week

When you first start learning German, picking the right article to use can truly be a roll of the “die” – so we’re entirely on board with this slightly unconventional way to decide whether you’re in a “der”, “die”, or “das” situation. (Warning: this may not improve your German.) 

Where is this?

Photo: picture alliance/dpa | Boris Roessler

Residents of Frankfurt am Main and the surrounding area will no doubt recognise this as the charming town of Kronberg, which is nestled at the foot of the Taunus mountains.

This atmospheric scene was snapped on Friday morning, when a drop in temperatures saw Kronberg and surrounding forests shrouded in autumnal fog.

After a decidedly warm start to November, the mercury is expected to drop into single digits over the weekend. 

Did you know?

November 11th marked the start of carnival season in Germany. But did you know that there’s a whole set of lingo to go along with the tradition? And it all depends on where you are. First of all, the celebration isn’t called the same thing everywhere. In the Rhineland, it’s usually called Karneval, while people in Bavaria or Saxony tend to call it Fasching. Those in Hesse and Saarland usually call it Fastnacht. 

And depending on where you are, there are different things to shout. The ‘fools call’ you’ll hear in Cologne is “Alaaf!” If you move away from Cologne, you’ll hear “Helau!” This is the traditional cry in the carnival strongholds of Düsseldorf and Mainz, as well as in some other German cities.

In the Swabian-Alemannic language region in the southwest of the country, people yell “Narri-Narro”, which means “I’m a fool, you’re a fool”. In Saarland at the French border, they shout “Alleh hopp!”, which is said to originate from the French language. 

Lastly, if someone offers you a Fastnachtskrapfe, say yes because it’s a jelly-filled carnival donut. And if you’re offered a Bützchen? It’s your call, but know that it’s a little kiss given to strangers!

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