Guide To Banking in Germany for Expats, Students and Immigrants: How does it work? What do you need to know?

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Guide to make sure you understand how banks in Germany work: From Lastschrift (Direct Debit) to Zinsen (interest rates), there may be terms that you don’t know if you’re new to banking in Germany.

Guide To Banking in Germany: Banking in Germany is made up of private commercial banks (the largest sector, making up around 40% of banking assets), public savings banks (Sparkassen and Landesbanken), and co-operative banks (Genossenschaftsbanken). Here’s an easy 2022 Guide To Banking in Germany with useful information and tips for Expats, Students and Immigrants when they want to open a German bank account.

Guide To Banking in Germany

Guide To Banking in Germany: How do German banks work?

How a do bank in Germany works? How do they earn money? How are banks in Germany divided up and in which business areas are they in?

In order to understand how banks in Germany work, you first have to understand what banks do in general:

Retail BankingWealth managementInvestment banking
• Offering a salary, savings or pension account
• Granting of mortgage credit to purchase real estate
• Processing of payments via a bank account
• Paying out cash at ATMs or over the counter
• Distribution of credit cards
• Simple consultations
Personal banking
• Wealth advice and wealth management for the wealthy private customers, e.g. B. Development of investment strategies

Asset management
• Management of Funds
• Consulting and administration of the financial assets of larger institutions
• Carrying out capital raising by companies (issue of shares or bonds) on the capital market
• Advice and support for companies in takeovers
• and mergers
• Development of new financial products, e.g. B. securitized receivables
• Purchases and sales of financial products in the name and on account of the bank (proprietary trading)

Bank account in Germany: Differentiating banks in Germany by services

▶︎ When people talk about a bank in Germany, they usually mean normal retail banks and not investment banks.

The list of banks in Germany under this category includes the best-known retail and commercial banks such as:

Apart from the commercial banks, there are also the investment banks. This includes banks like

  • Goldman Sachs
  • UniCredit
  • JP Morgan
  • UBS
  • Commerzbank
  • Deutsche Bank

If a bank decides to be active in both business areas, then one speaks of a universal bank to which belong

Most investment banks are now pursuing the universal bank approach, as pure investment banking has become too risky and regulated.

Guide To Banking in Germany

Guide To Banking in Germany: Banking services

1. Girokonto:

What is a Girokonto and what do I need it for? 

The Girokonto is a Checking account or Current account) in Germany and is the standard account you will need when you are in Germany. 

▶︎ The Girokonto is also the only account that you can overdraw (called Dispi in Germany). 

▶︎ The money in your checking account is constantly on the move, hence the name “giro“, which means something like “circle” in Italian.

Changing or opening a current account – what you should pay attention toIf you decide to open a Girokonto or to change their current one, you should think in advance about which services you want and need because that’s what differentiates banks.
Monthly Account Maintenance FeesSome banks charge “account management fees” when opening and operating your checking account on a monthly basis.
Cash Deposits and WithdrawalsWhen choosing a Girokonto in Germany, it is important to check where and whether cash can be withdrawn free of charge using the EC card. 
Open an account – anytime, anywhereFor most banks in Germany you can open an account online. 
Online banking / appThe Girokonto account is very often used via online banking or your bank’s app
The free cloud – digital and secureDo you want to keep important documents and records safe, but are you tired of having to file new papers year after year? Some banks offer an eSafe in online banking 

2. Saving & investment accounts

Almost all German banks also offer savings accounts and investment accounts.

Festgeldkonto / fixed deposit accountGerman banks offer the Festgeldkonto or fixed deposit account if you want to invest your money profitably for a certain period of time with fixed interest rates for the entire term.
Sparbuch / Passbook – Savings accountMost German banks offer the classic savings account
Sparbrief / savings bondMost banks offer yield plus security with the savings certificate. The savings bond offers you good interest with a high level of security for medium- and long-term investments.
Other savings and investment optionsMost banks also offer other savings and investment options such as:
• Fixed goal savings plan
• Installment savings
• Premium savings
• Educational savings
• Fixed Income Securities
• Securities account
• Savings allowance
• Housing premium
• Employee Savings Allowance

Guide To Banking in Germany: The best apps for mobile banking in Germany in 2022

The corona crisis managed to drive a majority of Germans to switch to mobile banking. Banks are challenged by very different customer needs. A study of the top banks in Germany conducted by S.W.I. Finance shows which banks in Germany offer the best app for mobile banking in 2022.

The best app for mobile banking in 2022 in Germany

PositionBankPoint (out of 100)Grade
1Sparkassen82.5Very good
2Deutsche Bank81.7Very good
3ING80.5Very good
4Comdirect77Very good
5Openbank76.9Very good
6Vivid Money76.8Very good
7Hypo-Vereinsbank76.6Very good
8Commerzbank75.1Good
9N2675.1Good
10Consorsbank75.1Good
11DKB72.6Good
12Sparda-Bank71.6Good
13Revolut69.8Good
14Volks- und Raiffeisenbank69.2Good
15Postbank64.4Good
The table shows how financial institutions in Germany performed with their mobile banking apps (iOS, Android) and in the mobile browser.
Guide To Banking in Germany

Guide To banking in Germany: The best banks in Germany for foreigners 2022

The following 3 banks are the best banks in Germany for foreigners. They offer the cheapest checking/current accounts and no storefronts visit. Withdrawing money at home and abroad is often free of charge

ReviewBank: DKB Bank: N26 Bank: Comdirect
Who is allowed to open an account?Persons residing in Germany, Austria and Switzerland (regardless of nationality)Residents of Germany, Austria, Ireland, France, Spain, Italy, the Netherlands, Belgium, Portugal, Finland, Luxembourg, Slovenia, Estonia, Greece, Slovakia, Switzerland, Poland, Sweden, Denmark, Norway, Liechtenstein, Iceland and USA (regardless of nationality)Persons residing in Germany, Austria and Switzerland (regardless of nationality)
Account Maintenance FeeFreeFreeFree
Debit cardVisa debit card (free)Mastercard debit card (free)Girocard and Visa debit card (both free)
Credit cardVisa credit card (can be booked as an option – €2.49 per month)Visa credit card (can be booked as an option – €1.90 per month
Withdrawing money in Germanyfree of charge with Visa debit card at all ATMs with Visa signAt the ATM 3 times a month free of charge, after that 2 € each time. Cash can be withdrawn free of charge in over 9,000 shops in Germany (e.g. REWE, Penny, dm).Free with Girocard – only Cash Group machines
Withdrawing money in the Euro area zonefree of charge with Visa debit card at all ATMs with Visa signWithdrawals in EUR currency are completely free of chargefree with Visa debit card at all ATMs with Visa sign (3 times per month)
Withdrawing money abroad (not in the Euro zone)free of charge with Visa debit card at all ATMs with Visa signFor withdrawals in non-euro currency, a fee of 1.7% of the withdrawal amount.free with Visa debit card at all ATMs with Visa sign (3 times per month)
Credit interest0%0%0%
Overdraft interest6.74%8.9% (at the beginning the account is based on credit / no overdraft facility)6.50%
Open accountOnlineOnlineOnline
Identity verification in GermanyPostIdent, VideoIdent (video chat)VideoIdent (video chat), PostIdent (N26 sometimes uses PostIdent for customers with non-German ID cards)PostIdent, VideoIdent (video chat)
Identity verification abroadVideoIdent (possible in 40 countries) , bank or lawyerPhoto Identificationnotary
The best banks for foreigner in Germany 2022


Good to know
 : A valid residence permit or at least a Duldung is a prerequisite for opening an account in Germany. If you entered the country illegally or simply stayed in the country after your permit or visa expired, it is not possible to open an account.

Guide To Banking in Germany: Blocked account for foreign students 2022

Important questions and answers about the blocked account: Do you come from a non-EU country and would like to study in Germany? Then you probably need a blocked account. You can find out exactly what that is and how you can open a blocked account here. 

The German authorities are expected to increase the minimum amount required for a blocked account for international students in Germany from the current €10,332 to €11,172 from the start of the fall semester of the 2022/2023 academic year. This also means that the amount students can withdraw per month will increase from €861 to €931.

How do you open a blocked account?

▶︎ The blocked account can be opened online or by post from abroad.

Here’s how you do it:

  1. Choose the provider for your blocked account. The opening can be done online. Alternatively, you can download the application to open an account. The form is usually also provided in English.
  2. Gather your documents. You need a copy of your passport and your admission to study in Germany.
  3. Now you make an appointment with a German mission abroad. There the documents will be certified. The embassy or consulate will send these documents to the respective bank.
  4. As soon as the documents arrive in Germany, the bank or savings bank starts opening the account. IBAN and BIC will be sent to you by email.
  5. You pay in the required amount by international bank transfer. That is currently 10,332 euros for one academic year. You can split the amount into several partial amounts.
  6. If you can prove that your blocked account is well filled, the German embassy will issue you with a student visa.

▶︎ TIP: If there are already students from your home country in your university town, ask these fellow students for a recommendation for the blocked account.

Guide To Banking in Germany: Is your money secure?

How secure in your money in Germany?

  • If your bank goes bankrupt, your money is protected up to an amount of 100,000 euros. This deposit protection applies – in different ways – to banks within the European Union. 
  • The deposit protection applies, for example, to call money, time deposit and current accounts, to the savings book and the clearing account of a securities account.
  • In Germany, in addition to the statutory deposit insurance, there are also voluntary protection systems for amounts over EUR 100,000.
  • In the event of a crisis in the entire banking sector, however, deposit insurance could reach its limits, especially in economically weaker EU countries.

Compensation schemes at private banks in Germany

EdBBdB
The Compensation Scheme of German Private Banks (EdB) is responsible for private banks. The EdB’s job is to compensate the creditors of a bank assigned to it where the bank is unable to repay deposits.

▶︎ However, not all banks in Germany that offer day and fixed-term deposit accounts in Germany are also subject to local deposit insurance. For some, the deposit insurance of the country in which the bank is based is responsible.
For example:
• Consorsbank is a branch of BNP Paribas and is therefore a member of the French deposit protection fund
• Leaseplan Bank belongs to the Dutch fund
Many private banks in Germany are also members of the Association of German Banks (BdB) which offers a second pot with a larger scope of protection.
▶︎ It covers credit balances above the statutory deposit guarantee for each customer, up to a different amount depending on the size of the bank. Find out if your bank also participates in the BdB’s voluntary deposit protection fund HERE.

Compensation schemes at public banks in Germany

VÖBEdÖ
The Association of German Public Banks (Bundesverband Öffentlicher Banken Deutschlands, VÖB) compensation scheme (statutory deposit guarantee) secures customer deposits as well as liabilities from securities transactions.

▶︎ The associations Voluntary Guarantee Fund provides additional security for deposits.
Up until 2021, public banks in Germany, which are organized in the Federal Association of Public Banks in Germany VÖB, maintained their own statutory deposit insurance (Compensation Scheme of the Federal Association of Public Banks in Germany, EdÖ).

▶︎ However, this was dissolved on October 1, 2021.

Savings banks and cooperative banks with institutional security

Savings banks, state banks, state building societies and cooperative banks are not members of the statutory compensation schemes. Instead, they rely on a so-called institutional security. 

▶︎ Institutional security: the members step in if a bank from the association gets into trouble. This is intended to rule out the possibility of insolvency and thus a compensation event occurring at all. Accordingly, the deposits of the customers are secured on paper to an unlimited extent.

  • The Savings Banks Finance Group has its own security system. If one of the member institutes gets into financial difficulties, the others ensure the solvency of the affected savings bank within the framework of the legal requirements. 
  • The cooperative banks are organized in the protection scheme of the National Association of German Cooperative Banks (Federal Association of Volks- und Raiffeisenbanken) (BVR).

Statutory deposit insurance for banks from other EU countries

The offers with the highest interest rates for call money and fixed-term deposits usually come from banks that do not have their license from Germany, but from another EU country. Banks with Dutch, French or Austrian licenses are primarily represented on the German market.

▶︎ Compensation payments run automatically through the German deposit guarantee system on behalf of the foreign institution. 


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Expaturm
Expaturmhttps://www.expaturm.com/
Expaturm aims to help educate Expats in Germany on key issues that they will have to deal with while living in Germany by providing everything you need to know about Banking, Healthcare, Lifestyle, and Housing in Germany

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