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MONEY

Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Published: 12 May 2022 17:13 CEST
Woman with wallet
A woman looks in her wallet while grocery shopping. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 

READ ALSO:

What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life

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For members

GERMAN CITIZENSHIP

How much do you need to earn to qualify for citizenship in Germany?

Applicants for German citizenship need to be able to support themselves financially, but it's often unclear what that means in practice. Here's how to work out if your income is high enough for citizenship.

Published: 15 May 2024 15:29 CEST
How much do you need to earn to qualify for citizenship in Germany?

Out of the requirements for qualifying for a German passport, supporting yourself financially is one of the most important – and one of the most confusing.

Many foreigners assume that the authorities have a magic number in mind and will often worry about whether their income is above or below this threshold.

In reality, though, the law is much more flexible. In section 10 of the nationality law, it states that applicants must show that they “can support themselves and their dependent family members without claiming benefits under the Second or Twelfth Book of the Social Code.”

In other words, that your income is healthy enough to not rely on the state for things like long-term unemployment benefits.

According to Fabian Graske, an immigration lawyer at Migrando, around €1,500 gross per month for a single person is usually considered enough to live on. 

That said, there isn’t really a one-size-fits-all approach to this quesiton. 

When it comes to working out if your income is high enough, you’ll need to take into account a number of factors that your case worker at the naturalisation office will also weigh up. 

That’s why it’s important to ask yourself a number of questions that go beyond just how much you earn: 

How high are your living costs? 

In Germany, there are huge regional differences in the cost of living, so what someone can afford to live on varies hugely from place to place.

For example, someone living in pricey Munich is likely to need much more money for rent or their mortgage than a resident of much more affordable places like Halle or Leipzig, so you should consider whether what you earn is enough to offer a basic standard of living in the city or town you live in. 

READ ALSO: Requirements, costs and permits – 6 essential articles for German citizenship

It is worth mentioning, though, that what you actually pay for rent and bills matters more than the averages. If you’re lucky enough to find an apartment with unusually low rent in Berlin, for instance, you can probably get away with earning less money as well. 

Are you single or do you have a family?

If you’re single and have no children, you’ll likely get a lot more lenience from the authorities when it comes to having a lower-than-average income.

A family sit at a lake.

A family sit at a lake in Bavaria. Image by Eva Mospanova from Pixabay

Of course, if you have dependents such as kids or a spouse who doesn’t work (or both), you’ll need to ensure not only that your own living costs are taken care of, but also that your family can survive on your income alone.

That naturally means you’ll be expected to earn a certain amount more for each dependent child or adult.

On the plus side, any income your spouse does earn will be counted alongside your own, so if you’re the one who is supported by their partner, the authorities will also take this into account. 

Is your job stable or unstable?

One key thing to think about when applying for citizenship is the security of your work contract. Someone who has a long-term contract with an employer and has passed their probationary period will be in a much better position than someone who is still on a three-month trial, for example.

This doesn’t mean you shouldn’t submit a citizenship application after just starting a new job, but be aware that the authorities may well wait to process your application until you’ve passed the initial probation and have been put onto a longer-term contract. 

A similar rule of thumb applies to people who are currently claiming Arbeitslosengeld I (ALG I), or unemployment insurance. Though this doesn’t disqualify you from citizenship, it may delay your application until you can find a stable job. 

READ ALSO: Can I still get German citizenship after claiming benefits?

Do you need to rely on welfare payments to get by?

A key aspect of German naturalisation law is working out whether you’re likely to be a financial burden on the state by relying too much on the welfare system.

The entrance to the Jobcenter in Düsseldorf,

The entrance to the Jobcenter in Düsseldorf, North Rhine-Westphalia. Photo: picture alliance/dpa | Oliver Berg

While everyone needs a helping hand from time to time, claiming benefits like long-term unemployment benefit (Bürgergeld) or housing benefit (Wohngeld) to top up your income sadly shuts you out of the naturalisation process and could also make it hard for you to qualify in the future. 

Luckily, this doesn’t apply to all types of state support – Kindergeld, ALG I and Bafög don’t count, for example – so seek advice from a lawyer or your local citizenship office if you’re unsure.

How old are you?

Though this is hard to fully quantify, age can sometimes play a role in assessments of your financial fitness in Germany.

A young person fresh out of university or vocational college may be seen as someone with high earning potential over the years, so in some cases the authorities may take a more relaxed approach to their current income.

In contrast, an older person coming to the end of their working life could be held to slightly stricter standards. 

This is also why it can be important to show that you have sufficient pension contributions or another form of security for the future, such as owning your own home or having lots of savings. 

READ ALSO: How can over 60s get German citizenship under the new nationality law?

What counts as ‘income’ under German law?

It’s important to note that income doesn’t just have to mean the salary you get at your job: income from rental properties, side hustles and freelance gigs can also be included, as well as things like alimony payments after divorce.

Once again, if you’re unsure, just ask. The citizenship offices are there to advise you and should give you clear instructions about what kind of documents count as proof of income in your application. 

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