What are the Pros and Cons of direct banks in Germany?


Share post:

Anyone who needs money or wants to invest savings can usually find good conditions online with direct banks. In contrast to branch banks, they do not have any local branches and only do business online.

Direct banks have no branch network and therefore lower labor costs. Customers complete all banking transactions and applications exclusively via online banking. Direct banks can usually offer their bank products, interest rates and conditions more cheaply than branch banks.

Direct banks offer a wide range of products

The number of direct bank customers has been rising continuously for years. The inexpensive checking accounts and credit cards are particularly popular with German bank customers. However, the established Internet banks also offer other products and services – their product portfolio is usually as comprehensive as that of branch banks, even if the offer can vary considerably depending on the institution. These are the most important services at a glance:

  • Checking accounts
  • Call money and fixed deposit accounts
  • Credit cards
  • Securities account
  • Granting of loans
  • Pension products

For Expats in Germany, we would suggest that you look at the following direct banks that offer a lot of financial products:

direct banks

The principle of the direct bank

Direct banks offer their services without operating branches. The accounts are mainly contacted and managed via online banking and the telephone. Customers can manage checking accounts, cards, various savings products and much more via the website of their direct bank. However, this does not mean that direct banks came into being with the Internet and have always been online banks. 

The first banks without a branch network made it possible for their customers to conduct banking transactions directly over the phone. They positioned themselves on the market in the nineties. Today the terms direct and online bank are usually used synonymously.

The popularity of direct banks has increased enormously in recent years. The Frankfurt consulting firm Investors Marketing has determined that the number of direct bank customers was 3.9 million in 2000, increased to over 14 million in 2010 and around 18.2 million in 2015.

The advantages of direct banks

Compared to branch banks, direct banks often offer their products on better terms. In the vast majority of cases , the account management fee is waived . Online banks often create additional incentives such as free credit cards and credits for new customers. You can grant such additional services, since you do not have a branch network and thus save the considerable costs for rent, personnel and maintenance. The direct banks can pass these savings on to their customers.

Direct banks are also often ahead of branch banks when it comes to the interest rates offered on overnight and fixed-term accounts. This can be particularly important in the current low interest rate phase. In the worst case, the low interest income for savings investments can even lead to the invested money losing purchasing power due to the price increase.

direct banks

Personal advice versus lucrative conditions

As a general rule, there is little need for advice on current accounts as well as day and time deposit accounts. The most important thing here is good conditions and the most convenient administration possible. Once you get to know the functions of an online bank account, you only need a little time for transfers and other processes. Upon request, customers can also clarify questions by phone or email with the direct bank service staff. However, waiting times on the phone are not excluded. There is no need to go to the branch. How important personal on-site advice is is ultimately a question of type.

1. Long-term investment products

In the case of long-term investment products, which may contain stocks and bonds, the advice is more important. This is where customers often make far-reaching decisions that have an impact on retirement provision, risk coverage or the financing of a home . Above all, customers who do not deal professionally with financial issues need a competent advisor with whom there is a trusting relationship. House banks with their permanent account managers are therefore often still the first choice when it comes to long-term investments.

2. Securities trading at direct banks

Nevertheless, a direct bank can also be the right contact for securities trading. The required deposit can usually be set up inexpensively, and the transaction fees are usually low. In the case of the issue surcharge in particular – a fee that is due when purchasing fund units – direct banks sometimes grant considerable discounts compared to established banks. Financial beginners should still be careful with a deposit without prior personal advice. Risk assessment of funds and other financial products often requires some experience.

Cash access at direct banks

In order to give their customers the closest possible network of ATMs free of charge, direct banks rely on different solution models. With some providers, customers can use their credit card to withdraw money from their current account free of charge at all ATMs in Germany.

Other online banks join groups such as CashPool or Cash Group , whose customers can withdraw and deposit money free of charge at the ATMs of all participating banks. If, on the other hand, they want to use a third-party machine, this costs fees. How high these are depends on the operator of the ATM.

direct banks

Switching to a direct bank

Many, for whom the fees of their house bank are too high, shy away from switching because of the effort involved. The prospect of redirecting standing and direct debit orders and informing contractual partners and employers prevents many from switching banks. Without a certain amount of effort, it is in fact impossible to change, although many Internet banks offer a service specifically for this. The customer simply notifies the new bank of all the facilities that should be informed of the change. This then takes over the notification of the new connection data. Instructions can be found in the account switch guide .

New customers can have their identity checked when opening an account or taking out credit either by Postident or, with more and more online banks , also by Videoident .

Requirements for opening an account

An account can be opened for the first time at the age of 18. If you want to open an account beforehand, you need a declaration of consent from your parents. With each opening, the financial institutions obtain permission to query Schufa. Negative entries usually do not lead to the rejection of a current account, but can have an impact on the conditions – for example on the granting and interest of an overdraft facility.

Direct banks in comparison

There is no such thing as a direct bank that offers the most customer-friendly and lucrative conditions in all areas. While account management is free at the majority of online banks, they focus on other areas and are accordingly well suited depending on the type of customer. Interested parties should consider the following aspects when deciding on a specific direct bank:

  • Cash availability : How important is it to you to withdraw and deposit money at ATMs free of charge? How dense is the network of toll-free ATMs?
  • Credit card : Does the direct bank offer a free credit card for the current account? Can the credit card also be used to withdraw cash domestically?
  • Abroad : Is it possible to use my credit card to pay and withdraw cash abroad free of charge?
  • Incentives for new customers : does the bank offer credit or special conditions for new customers?
  • Overdraft facility : What interest does the bank charge for using the overdraft facility? What is the interest rate for an unauthorized overdraft?
  • Financial investment : What are the terms and conditions for day and time deposit accounts? What are the interest rates and the minimum term? What are the upper and lower limits for the savings balance?
  • Securities trading : does the direct bank charge custody fees? What are the transaction costs ? What discounts does the direct bank grant on the issue surcharge? Which financial centers does the custody account allow access to?
  • Loans : Should the bank have loan financing in its product portfolio? What are the conditions for the various types of credit?
  • Service : What advisory services does the online bank provide? Are these chargeable?

Deposit security with direct banks

The control and security measures for direct and branch banks do not differ. The banks of both models are bound by European and German law and are controlled by the relevant supervisory authorities – provided that they are based in Germany or another EU country. In Germany, the Federal Financial Services Agency (BaFin) is responsible for this.

In the EU, deposits are insured up to an amount of 100,000 euros. For joint accounts, the security limit doubles to EUR 200,000. This means that in the event of bank insolvency, customers’ savings are safe. In such a case, funds from a security fund are used. Banks are legally obliged to save assets in such a way. This security mechanism applies to checking accounts as well as to day and time deposit accounts.

Conclusion: Direct banks are a good choice in many areas

Because of the free account management, current accounts with direct banks are very attractive for everyday payment transactions. In addition, customers can often benefit from higher overnight and fixed-term interest rates than with a branch bank, which is a major plus in times of low interest rates on savings. After all, nobody wants the purchasing power of savings to decrease over time. Customers who want to use more complex financial products and services, on the other hand, often feel that they are in better hands with a branch bank and a permanent account manager.

Anyone who has decided to switch to a direct bank should compare different providers – taking into account their own usage behavior. Which services are relevant, which are unimportant and what are the conditions for the relevant services? The answers to these questions can be used to quickly determine the direct bank that suits you best.

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


  1. 3 stars
    Hi to all, how is everything, I think every one is getting more from this website, and your views are pleasant in support of new viewers.

  2. 3 stars
    This is really interesting, You are a very skilled blogger.
    I have joined your rss feed and look forward to seeking more of your
    magnificent post. Also, I’ve shared your web site in my social networks!


Please enter your comment!
Please enter your name here

Related articles

Punks have taken over Sylt! Chaostage Sylt 2022 – Thanks to the 9-euro ticket!

The 9-euro ticket for 3 months seems to have caused a stir. The island of Sylt which is...

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

Guide to make sure you understand how banks in Germany work: From Lastschrift (Direct Debit) to Zinsen (interest...

Is the EU making E-cars compulsory through the back door?

The EU has decided to reduce CO2 emissions by 55 percent by 2030 compared to 1990 levels. In 2050,...