Account management fees: information & tips
Since the majority of payment transactions are now only processed electronically, it is almost impossible to do without a current account in Germany. Employees, in particular, cannot avoid setting up such an account, since the companies practically only pay their wages by bank transfer. At first glance, the offers of the banks do not differ that much, but you should look carefully, especially when it comes to account management fees.
Here is what you should look out for when opening a current account.
- What are account management fees?
- Choosing the right account
- Are there current accounts without account management fees?
- Settlement of account management fees
- Separate fees
- Deduct account management fees
- Save account management fees
- Many banks are reintroducing account fees
- How do customers find a cheap bank?
- Avoid hidden fees
- Account management fees in the tax return
What are account management fees?
When you open a current account , the bank takes on various services for you as a customer. For example, it carries out transfers, allows you to make cashless payments in shops with an EC card and manages all account transactions.
In the past, banks almost always paid for this administrative burden with separate fees – for example, a fee was charged for issuing an EC card or for delivering bank statements that were not accessed. This practice has meanwhile been set narrow limits by various court rulings – including by the Federal Court of Justice. If the bank is primarily pursuing a self-interest with a service – or if it merely fulfills legal obligations – it may not charge any fees for this.
In order to avoid possible legal disputes with customers, some banks have switched to charging a flat-rate account management fee that covers all services relating to the current account. But not all banks always charge such a fee – many also have a current account without account maintenance fees in the program, for example for students. There are even banks with no account management fees that do not charge fees at all. Mostly these are online or direct banks that conduct their business over the Internet or the telephone.
Here is an overview of the account management fees at some large German banks:
|Bank||Account management fees||start credits, Initial balance|
(from at least 1,200 euros monthly incoming money; otherwise 9.90 euros)
|Deutsche Bank||0 euros|
(including for schoolchildren, students and trainees up to and including 30 years; otherwise from 4.99 euros)
(including for schoolchildren, students and trainees up to and including 26 years; otherwise from 2.90 euros)
|ING-DiBa||0 euros||75 euros when opening an account|
(from November 1, 2016 regardless of receipt of money)
Choosing the right account
As you can see, the conditions for a current account at the banks differ quite significantly. So if you’re looking for a suitable account, it’s worth making a comparison . However, you should not only look at the pure account management fees, because there are other services that are important here. For example, if you travel a lot and often have to withdraw money from ATMs that do not belong to your bank, it may be cheaper to opt for a current account with account management fees, but if you can also withdraw money free of charge from non-bank ATMs.
The provision of a credit card can also be of interest when choosing a current account. If you are abroad regularly or do a lot of online shopping, a credit card is a practical relief. In this case, a current account is recommended, where you can get the card free of charge.
In addition, you should also include the debit interest in the comparison, because these are ultimately only bank fees. In general, of course, it is not desirable to overdraw the current account, but sometimes there is no way around the overdraft facility . Since the interest rates of the banks differ by up to five percentage points here, it is worthwhile to take a closer look at the debit interest before opening the account – especially if you use the overdraft facility more often.
1. Neglect current account debit interest rates
While there are big differences between the individual offers of the banks in terms of debit interest, things are very different at the moment with credit interest. Most banks no longer pay interest on balances on the current account, a few offer between 0.1 and 0.25 percent interest.
This interest is negligible when choosing the current account, because even with a deposit of 5,000 euros, only between 5 and 12.50 euros in interest are accrued per year. The interest rates are never high enough to accept high fees. Apart from that, it is not recommended to leave such a large amount in the checking account. There is significantly more interest, for example, on an overnight or fixed-term deposit account .
2. Regional differences
You may have already missed two banks in the overview above: Sparkasse and Volksbank. There is a very simple reason for this: there is no such thing as a savings bank or a Volksbank. Savings banks and Volksbanks operate in certain, clearly defined regions. There are, for example, the Sparkasse Wuppertal or the Volksbank Göppingen, which only offer their services in these regions. Although both the savings banks and the Volksbanken work together in an association in order to be able to offer certain services throughout Germany, the individual banks operate independently of one another and therefore sometimes have different conditions for certain products, such as the current account.
By the way, the differences can be very clear here. For example, Frankfurter Sparkasse has a current account without account management fees in its program, which also offers very favorable interest rates with a credit interest rate of 0.15 percent and a debit interest rate of 7.09 percent. In addition, the customer receives a MasterCard here free of charge. At Hamburger Sparkasse, on the other hand, there is a monthly account management fee of EUR 6.90, and the interest rates of 0 percent on the credit side and 11.81 percent for account overdrafts are much less favorable. The MasterCard also costs 20 euros a year.
However, whether and to what extent account management fees are charged cannot be determined by specific regions or federal states. For example, the Sparkasse Dortmund does not charge any account management fees, while the Sparkasse in Essen, only 30 kilometers away, charges 7 euros per month for the current account. The amount of the account management fees depends solely on the business model of the bank – some try to cover part of the costs with the fee, while others try to build up the largest possible customer base with free checking accounts.
Are there current accounts without account management fees?
In principle, banks are also allowed to charge fees for each account, but there are many cases in which they voluntarily waive them. In general, checking accounts are free for:
The banks often waive a fee if a certain minimum amount is received on the account every month, for example 1,000 or 1,200 euros. In this case, the bank assumes that the account is sufficiently covered so that it can manage and earn money with the customer’s money. Social welfare recipients are often left behind when it comes to account management fees, as there are usually no special accounts for them that do not pay the fee. It is advisable for them to opt for a bank with no account management fees, such as:
Settlement of account management fees
When the fees for an account are debited depends on the terms of the respective account contract. As a rule, however, they are debited from the account at the end of a quarter. If the account does not have sufficient funds at this point, the overdraft facility of the account will be used first, if available. Otherwise, the bank will usually debit the fees from the account as a tolerated overdraft and inform the owner of the overdraft.
Even if the collection of fees has now been severely restricted by various courts, there are still some cases in which the banks are entitled to charge additional fees in addition to the regular account management fees. One of the best-known examples is probably the ATM fee. If you, as a customer, withdraw money from the ATM of another bank, fees will apply. Although many banks have now joined a vending machine network, so that access to third-party vending machines are not always associated with costs, the banks are generally still entitled to charge separate fees for this service.
Another case where additional fees are allowed is in the replacement of credit– and EC cards. If you as a customer lose your card or if it becomes unusable through your fault, the bank may pass on the costs for the replacement card to you. However, this does not apply if the card is lost or damaged in the mail. The bank itself has to pay for the costs.
Fees for the creation of bank statements are also permitted. So if you request statements from the bank for a certain period of time, you have to expect costs. Only when it comes to the amount of the costs are the banks obliged by a court order to orientate themselves on the costs actually incurred.
Deduct account management fees
The fees for a current account can usually be deducted from taxes without any problems. Employees can apply a flat rate of 16 euros to their current account as income-related expenses for income from non-self-employed work. An actual proof of the costs is not required. Costs for accounts that are used to settle rental activities can even be deducted in full. The prerequisite here, however, is that the account is used exclusively for rental activities.
Save account management fees
More and more banks are charging their customers for account management fees again, or the fees are being increased. Other providers charge variable fees for making bookings or other transactions.
Many banks are reintroducing account fees
The fact that many banks are reintroducing a fee for account management is due to the interest rate policy of the European Central Bank (ECB). The ECB sets the key interest rate together with the central banks of the European countries. This determines the interest rate at which the banks can borrow money from the ECB, which they then pass on to customers as credit . At the moment this key interest rate is zero, which is why the loans granted by German domestic banks are very cheap. In this way, the ECB is trying to stimulate the economy in Europe. For the banks, however, the low key interest rate means a loss of income, because they also receive less interest from their customers for the loans that they in turn grant them.
A lower interest rate also means that fewer people save by investing their money firmly. That means that this capital is also lost to the banks. Nevertheless, they have to cover their running costs and also need cushion to absorb loans that have not been repaid. Through the account fees, the banks now pass the costs on to their customers.
How high can account management fees be?
The amount of the account management fees can vary widely. Since there is no legal upper limit, the prices vary depending on the bank between a few euros per month and a higher double-digit amount in the quarter. Accounts for schoolchildren and students are usually free of charge, but account holders must pay a fee at many banks at the latest when their first salary is received or when they are 27 years old.
When are account management fees debited?
Most banks debit the charges for an account every month or quarter. Sometimes customer preferences are taken into account, in other cases the account model specifies the intervals.
How do customers find a cheap bank?
If you are looking for a new account, you should first consider what exactly you want from your bank and secondly check offers carefully for hidden fees. If you want the service in a branch, you shouldn’t opt for an account with a direct bank. But even with the branch banks there are very different pricing structures that interested parties should compare with each other.
Branch banks: high account management fees necessary
The branch banks charge the fees for the current account primarily to cover the costs of the service provided by the bank staff. In times of online banking and self-service terminals, however, account holders carry out a large part of these services themselves. As a result, many no longer consider the account management fees to be justified. In addition, the interest rate on current accounts has gone completely out of fashion in the financial world. This means that there is no more interest on the credit deposited in the current account and the account generates more costs than profits.
Free payroll: direct banks on the rise
Direct or online banks have no branches and therefore have fewer expenses and often guarantee their customers a free current account. This was previously known as a salary account, as the account management fee was only omitted from a certain monthly payment. That could be a student loan, pension or salary receipt. Even today, some online banks still adhere to the minimum amount of incoming funds. However, just as many provide a fee-free account, even if there is no monthly payment. They can even offer additional benefits, such as toll-free credit cards or a bonus when opening an account .
Many direct banks do not have a dense network of their own ATMs for cash withdrawals, as customers know from branch banks. Instead, they provide their customers with a free credit card , which they can use to withdraw cash from their current account free of charge even at foreign ATMs. The consumer no longer has to pay attention to only using the ATMs of his own bank if possible – there are no more fees for third-party machines either.
Avoid hidden fees
Even with a current account that apparently does not require any account management fees, there may be hidden costs. If you switch, you should study the provisions very carefully and find out which services the bank charges fees for. Here are some examples:
- Does a minimum monthly amount have to be paid in order for the account to be managed free of charge?
- Are transfers free? With some banks, online transactions are free of charge, but paper transfers are not.
- Does the bank charge a fee for sending the TAN via SMS?
- Is the overdraft interest cheap?
- Which cards does the account holder get and what do they cost? Often, credit cards are only free for the first year in which the account exists, and some banks even charge fees for the girocard.
In addition to the amount of various bank charges, the following information is of interest to bank customers:
- How dense is the machine network?
- What is the cost of withdrawing from non-institute and foreign ATMs?
- Bonuses are also an interesting point, but they are mostly one-time payments that cannot offset ongoing additional costs compared to cheaper accounts.
In view of the abundance of offers from both branch and direct banks and the multitude of possible costs, it is not that easy to find the right account.
Account management fees in the tax return
Both self-employed and employees can deduct the account management fees for their current account from tax. For this purpose, business-related transfers must be shown as business expenses in the tax return. The same also applies if an account is only used for the administration of rentals and thus income-related expenses arise from the rental income. For every current account that is used for bookings in connection with rental properties or professional activity, the fees can be claimed as income-related expenses in the tax return. A lump sum of 16 euros is set for this.