Financial Crime World

The Lowdown on Banking in Germany

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Germany’s banking system can be complex and overwhelming for newcomers. To help you navigate this system, we’ll break down the differences between direct debits and standing orders, explore online and mobile payments, local and international money transfers, and more.

Direct Debits vs Standing Orders: What’s the Difference?

A common misconception among expats in Germany is that a direct debit and a standing order are one and the same. However, they’re not. A direct debit gives the company you’re paying permission to take an agreed amount from your account, whereas a standing order is an instruction given by you to your bank to pay a fixed amount to a third party at regular intervals. Both can be canceled at any time.

Online and Mobile Payments

Germany lags behind other European countries in terms of mobile payments, with only around 11% of smartphone users making payments through payment apps. However, online payments are more common, mainly through debit and credit cards. PayPal is a popular choice for e-payments, while Google Pay, Apple Pay, and mobile banking apps are also widely used.

Local Money Transfers

Transferring money between bank accounts in Germany is usually done through standing orders, direct debits, or bank transfers (Uberweisung). These methods are either free or low-cost. As a Eurozone country, Germany allows for seamless transfers to banks within the zone under SEPA agreements.

International Money Transfers

Transferring money internationally between banks in Germany and outside the EU/EEA usually involves a charge, which varies between banks. You’ll need to provide the International Bank Account Number (IBAN) and SWIFTBIC (Bank Identifier Code) for the receiving bank. Alternative solutions like CurrencyFair and Wise can be cheaper and more convenient.

Banking Fees in Germany

German banks are not always free of charge, so it pays to shop around for the best deals. Current accounts can range from free to around €5 a month, while ATM use is often free if you use an ATM from your own bank. Debit cards are usually free, but credit cards can cost up to €100 annually, plus APR fees.

Offshore Banking in Germany

Expats living in Germany may find it beneficial to open an international offshore account for managing their finances. These accounts offer distinct advantages like a wider range of cross-border services and lower taxation on funds. Deutsche Bank and Commerzbank have international arms that offer offshore banking services.

Banking Security and Fraud in Germany

Banking fraud is becoming increasingly sophisticated, with around 800,000 incidents reported in Germany in 2016, resulting in €132 million in damages. Common scams include phishing, false online purchases, and fake emails asking for initial fee payments. To protect yourself:

  • Never click on links to your bank’s website in an email
  • Never give out your password or PIN number
  • Only make online payments using secure platforms
  • Store personal data securely

Lost or Stolen Bank Cards

If your bank card is lost or stolen in Germany, inform your bank immediately, block the card by contacting the freephone 116 116 number, and report the issue to your nearest police station if you’ve been a victim of a crime.

Making a Complaint about Banks in Germany

If you’re unhappy with the service provided by a German bank, try to resolve the issue through their complaints department. If not resolved, you can make a complaint to the independent Financial Ombudsman in Germany, which is free but may require postage or legal fees if you consult with a solicitor.

Alternatives to Using Banks in Germany

If you don’t want to bank with a private German bank or international bank, consider opening an account with one of the many cooperative banks or public savings banks. These institutions offer different services at varying rates, although they may be less geared towards expats and have limited English-speaking staff.

Useful Resources

For more information on banking in Germany:

  • Visit the Deutsche Bundesbank, the central banking institution in Germany
  • Check out the Federal Financial Supervisory Authority (BaFin), which regulates the German banking sector and provides the banking ombudsman service.