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Banks in Germany
The German Banking System
If you visit Frankfurt on the Main, you’ll soon notice the numerous banks in the city center. The headquarters of all the country’s major banks and the European Central Bank are located there. The city’s post-World War II resurgence isn’t the only reason for its international reputation as the country’s center for finance and banking.
Starting with the first branch of the Rothschild banking empire, Frankfurt has been the capital for banks in Germany since the 18th century. But regardless of whether you live in a metropolis like Frankfurt or a small German town, there’s sure to be at least one financial service provider nearby.
There are two important kinds of banks in Germany: savings banks and co-operatives or credit unions, where the German state (e.g. a municipal or regional government) is one of the major shareholders. When opening a bank account, all residents can choose the financial organization they prefer.
Most banks provide similar services, but special offers, interest rates, and fees may differ. It can pay off if you take the time to shop around. However, all banks offer two essential services: a current account (Girokonto) and a savings account (Sparkonto). If you are interested in buying property in Germany, banks also offer advice on real estate and mortgages.
Lots of Germans prefer making small transactions in cash, and ATMs are widely available. Banks normally have a 24/7 ATM center (Geldautomat) somewhere in the building.
Generally speaking, you can withdraw cash from any machine. However, some ATM providers charge exorbitant fees if your bank is not associated with their company. This definitely applies to foreign bank accounts. But even when you are opening a German bank account, you should check where you can withdraw cash for free.
In Germany, the most important and common transaction is the bank transfer (Überweisung). After receiving your money order (in writing, on the phone, or online), your bank deposits money directly into the recipient’s account. You need the following information to complete a bank transfer:
- the name of the account holder
- the account number (Kontonummer) or an IBAN code for international transfers
- the bank routing number (Bankleitzahl) or a BIC / swift code for international transfers
- the name and location of the bank
The same procedure applies to giving a standing order (Dauerauftrag) if you want to transfer a specific sum to the same recipient regularly. For instance, many people use standing orders for rental payments.
Another widespread method for financial transactions is the Einzugsermächtigung (direct debit authorization). You entitle the recipient’s bank to withdraw an agreed upon sum from your account. This authorization is used for regular payments where the amount varies – e.g. for phone bills and other utilities. You can revoke the permission at any time, and it’s also possible to reverse recent payments.
The way electronic financial transactions are processed is currently changing throughout Europe. The Single Euro Payments Area (SEPA) was created to establish one electronic payment system across the entire EU (plus Iceland, Liechtenstein, Monaco, Norway, and Switzerland). This means that as of February 1, 2014, the IBAN and BIC are required for all bank transfers and direct debits in these countries, even domestic ones.
Private customers, however, can still use the account number and bank routing number for domestic bank transfers until February 1, 2016. A money transfer within the country takes two or three business days and is usually entirely free of charge.
Depending on which type of account you have, you will be sent an account statement on a regular basis (usually once a month). You can also print out your bank statement at a self-service terminal, often found next to an ATM.
Or, since many accounts now support online banking, simply check your account on the Internet. However, make sure to inquire explicitly about online banking services. According to a 2013 survey, Germans are rather reluctant when it comes to Internet banking: Only 45% of all German customers use it.
Opening a Local Account
It is relatively easy to open an account at a German bank. In most cases, you won’t need to provide collateral or find a warrantor. However, you should take care of some administrative paperwork beforehand. These are the documents you need:
- a valid ID
- proof of registration, including your current address. This means that you should have a German residence permit, since the latter is necessary to get said proof of registration (Meldebestätigung).
Most banks in Germany are open from circa 8am to 1pm and from 2pm to 4pm. They may have longer business hours once or twice a week and close at noon on Friday. Services and fees, however, vary greatly from bank to bank. Maximum limits on withdrawals or minimum requirements for incoming transfers are the most common restrictions.
Below, you’ll find a checklist of things to take into consideration when opening a German bank account:
- Will I receive an EC-Karte (debit card) immediately?
- Which ATMs can I use free of charge? Where are they located?
- Is a minimum income required for this account?
- What are my withdrawal limits?
- How much do I have to pay in fees if I overdraw my account?
- What’s my overdraft limit?
- What’s the debit interest (Dispozins) if I overdraw my account? (Debit interest tends to be rather high in Germany, with an average interest rate of 11%)
- How much is the average transaction fee for money transfers?
- Is there a limit on the number of transfers I can make or receive per month?
- What’s the processing time for money orders?
- Can I use all services immediately?
- Will I receive a credit card (Kreditkarte) free of charge?
- Does my bank offer online banking?
- What about telephone banking with foreign-language staff?
- Do I have a personal contact to ask for advice?
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