Why it's almost impossible to find a free bank account in Germany

It's a situation that pretty much only occurs in Germany in this day and age: walking half a mile in the rain to an ATM that belongs to your bank branch in order to access cash without an eye-watering fee.

In the cash-based Bundesrepublik, most credit institutes charge if you use a cash machine that's operated by other banks - and the fees can be as much as €6 for a single withdrawal. 

In other scenarios, from ordering a replacement debit card to setting up a standing order, bank customers in Germany are often hit by charges that would seem unthinkable elsewhere.

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And for anyone hoping for incremental improvements, there's more bad news: according to a new survey conducted by consumer portal Finanztest, bank fees are on the rise and the number of free-of-charge current or checking accounts (Girokonto) is sinking year-on-year. 

Of the 460 current account offers surveyed by the Stiftung Warentest publication, just nine offered unconditional free accounts for online customers. Of these, five also provided in-branch banking services.

This was a drop of 25 percent against last years' results, when Finanztest found 12 bank accounts that were free without restrictions. That was despite the fact that a total of 175 credit institutes were surveyed this year - 10 more than last year. 

For Stiftung Warentest, the definition of a "free" account is one with no monthly charge, no fee for account statements, a free Girocard or EC card and no cost for withdrawal from ATMs in the bank's own pool. In addition, there shouldn't be any conditions like minimum monthly deposits to avoid fees.

Focus on savings 

With interest rates soaring, banks in Germany are once again in a fierce battle for customers' savings deposits - meaning the most competitive offers are for this type of account.

Data from comparison portal Verivox shows increasingly generous interest rates and conditions for savers over the past few months.

That's because banks can make good money from charging customers more interest for loans than they pay out for savings - an income stream known as the "net interest income". This is an important source of income for financial institutions in Germany.

"At present, there are no signs that credit institutions are trying to attract new customers on a large scale with free current accounts," explained Finanztest expert Heike Nicodemus.

"Instead, I expect a further decline. Many institutions have cut jobs. They probably couldn't cope with a rush of new customers for free current accounts."

However, even the low-cost current-account segment is shrinking, with just 74 out of 460 of these checking accounts costing no more than €60 per year in 2023, compared to 79 in 2022. 

This estimate was based on a model account user who receives an average salary, manages their account online and exhibits average use patterns.

In contrast to the low-end segment, current accounts costing more than €100 per year were plentiful, with the average cost of a Girokonto coming in at €117 per year and the most expensive on offer coming in at €307 per year. 

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Hidden fees

When it comes to calculating the cost of a bank account, the monthly fee isn't the only thing to look at, personal finance expert Nicodemus explained.

In some cases where upfront fees are low, banks more for offering an EC card and for everyday transactions such as direct debits, credit notes, transfers and standing orders.

Choosing analogue banking methods over online banking can also come at a steep price, with non-digital bank transfers such as cash deposits often being met with fees.

Astoundingly, some banks in Germany even charge customers to withdraw cash from their own ATMs.

"That's a big deal," said Nicodemus.

One of the first banks in Germany to stir up the market with a free account was Dutch bank ING, but more recently it seems that banks are rethinking this model in favour of other types of benefits for loyal customers.

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This includes incentives for customers who operate more than one type of bank account or credit service with the same bank - a model that's been adopted by Volksbank and Raiffeisenbank recently.

Fo Nicodemus, fees in themselves aren't a bad thing - but they should generally be capped at a reasonable €60 or so per year.

"If I am competently looked after for it and have a contact person, I don't find that objectionable," she said. "A free current account is nice, but not mandatory."