Choosing the Right Current Account (Girokonto) in Germany: A Comprehensive Guide

A current account, known as a Girokonto in Germany, is essential for managing daily financial transactions, such as receiving salaries, paying bills, and making purchases. Selecting the right Girokonto requires careful consideration of various factors to ensure it aligns with your personal needs.

Understanding the Girokonto

A Girokonto facilitates participation in cashless payments and various banking transactions. It serves as an account for salaries, pensions, or other income and allows for payments via transfers, standing orders, or direct debits. Additionally, it enables cash withdrawals and can act as a reference account for credit cards, securities transactions, loans, and the payout of savings balances.

Key Considerations When Choosing a Girokonto

Fees and Charges

Banks may charge monthly maintenance fees, fees for specific transactions, or for additional services like overdraft facilities. Some banks offer free accounts under certain conditions, such as regular monthly deposits.

Costs of a Current Account

The costs for a current account can vary considerably depending on the provider and account model. Some banks, particularly direct banks without a branch network, offer accounts without any management fees, usually subject to a regular monthly minimum deposit. Young people often benefit from free accounts as well.

In addition to the account management fee, there may be extra costs for services such as the Girocard, ATM withdrawals, paper transfers, or printed account statements. The pricing depends on the bank and the chosen account model.

Accounts with higher management fees typically include additional services, such as a credit card, unlimited cash withdrawals, or paper transfers, making them a more comprehensive package.

Every German credit institution is legally required to provide customers with clear information about the services included in their products and their associated costs before signing a contract. The bank's price and service list outlines the costs of all services related to the account. It is advisable to review these along with the general terms and conditions before opening an account.

Overdraft Facilities (Dispokredit)

If you anticipate occasionally needing to overdraw your account, consider the availability and interest rates of overdraft facilities. Interest rates can vary significantly between banks.

Overdrawing Your Account

A so-called authorized overdraft—better known as an overdraft facility or "overdraft"—allows you to overdraw your current account within a predetermined limit. While you can agree on an overdraft facility with your bank, it is not a guaranteed entitlement. The limit is usually based on regular payments into your account, especially your salary. The interest rate is variable and can be adjusted by the bank at any time, so it is crucial to check the applicable rates to avoid unexpected costs.

An overdraft facility is one of the most expensive ways to borrow money for short-term financial shortfalls. It should only be used temporarily to cover urgent liquidity needs. If you require a significant sum that you cannot repay quickly, an installment loan may be a better option.

Tolerated Overdrafts: A tolerated overdraft is different from an agreed overdraft facility. Unlike an overdraft facility, a tolerated overdraft is not formally granted by the bank, and there is no prior agreement between the customer and the institution. Banks usually have internal limits for such overdrafts, but customers have no right to expect the bank to allow them to exceed their agreed credit limit or overdraft facility. The interest rates for tolerated overdrafts are usually even higher than for standard overdrafts.

SCHUFA and Credit Checks

Almost all banks in Germany are affiliated with SCHUFA, a private credit agency that collects and evaluates financial data for credit assessment. Since the introduction of the General Data Protection Regulation (GDPR) in 2018, customers receive a SCHUFA notice informing them that their data has been shared, along with a SCHUFA information sheet detailing data processing procedures.

SCHUFA records only information about account openings, loan applications, and financial behaviors (e.g., missed payments or legal enforcement actions). Personal financial details like income, savings, or account balances are not stored. Customers can request a free self-disclosure to review their SCHUFA data and correct any inaccuracies.

If a financial service is denied based on SCHUFA information, the customer must be informed of the reason. If incorrect data is found, individuals can contact either SCHUFA or the bank that reported the information to request corrections.

Branch Access vs. Online Banking

Traditional banks offer in-person services through local branches, which can be beneficial if you prefer face-to-face assistance. Online banks, on the other hand, provide digital services and may offer more competitive fees but lack physical locations.

Language Support

For non-German speakers, selecting a bank that offers services in English or other languages can be crucial for effective communication and understanding of banking terms.

ATM Access and Fees

Consider the bank's network of ATMs and any associated fees for withdrawals, especially if you travel frequently or reside in areas without easy access to your bank's ATMs.

Additional Services

Some banks offer extra services such as integrated savings accounts, investment options, or insurance products. Assess these based on your personal financial goals.

Steps to Open a Girokonto

Legal Requirements

Opening an account is a contractual agreement between the bank and the customer, meaning the account holder must have legal and business capacity. Legal capacity starts from birth, but full business capacity typically begins at age 18. Proof of identity is required, usually through an ID card or passport. For minors, legal representatives must provide consent.

Identity Verification

German law prohibits anonymous or fictitious accounts, meaning banks are required to verify the identity of account holders and authorized users. Numbered accounts, common in some countries, are not allowed in Germany.

Compliance with Money Laundering Regulations

Banks must fulfill due diligence obligations under the Money Laundering Act. This includes verifying whether the customer is acting on behalf of a beneficial owner and determining the purpose of the account (e.g., salary account, private or business use). Banks must also check if the customer is a politically exposed person (PEP).

Required Documents

Depending on the account type, the bank may require additional documents, such as proof of income for a salary account. It is advisable to check with the bank in advance to ensure all necessary paperwork is prepared.

Contract Finalization

If the bank accepts the account opening application, the contract becomes legally binding. While no specific legal form is required, banks typically require customers to sign a standard account agreement.

Deposit Protection

In Germany, the statutory deposit guarantee scheme protects balances on current accounts, overnight accounts, and savings accounts up to €100,000 per customer and bank. This also applies if you are a customer of a German branch of a foreign bank or of a German branch of banks from another EEA member state.

Conclusion

Selecting the appropriate Girokonto involves evaluating your financial habits, preferences, and requirements. By considering factors like fees, services, accessibility, and language support, you can choose an account that best fits your lifestyle and ensures seamless financial management in Germany.