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EXPLAINED: How to find the best high-yield savings accounts in Germany

A savings account can be a wise choice if you want to earn some interest on your deposits and keep them secure. The Local takes a look at the high-yield savings account options available in Germany.

Published: 23 February 2024 11:24 CET
Money spills out from a piggy bank
Money spills out from the bottom of a piggy bank. Photo: picture alliance/dpa | Hendrik Schmidt

Money left in a standard checking account, or a low interest savings account, loses value over time as inflation gradually reduces its purchasing power. 

Alternatively, deposits kept in savings accounts will increase in value over time, provided that the interest rate outpaces inflation.

With interest rates expected to remain high through 2024, now may be a good time to consider depositing some savings in an account with a high-yield interest rate.

Flexible savings accounts versus fixed-term deposits

If you want to open a high-yield savings account in Germany, there are basically two types of accounts to choose from: a flexible savings account (Tagesgeldkonto) or a fixed-term deposit (Festgeldkonto).

A flexible savings account, also called an ‘instant savings account’ or a ‘money market account’ in English, offers an easy way to earn some interest on your money while being able to access it at any time. This makes the flexible savings account ideal for holding money that you might need to use in the near future.

Interest rates on flexible savings accounts vary from bank to bank, and they can change depending on external factors such as the key interest rate of the European Central Bank, or the current market conditions. 

The central bank’s interest rates remain high so far in 2024, so it is possible to find German flexible savings accounts offering interest rates of up to 4 percent.

On the other hand, a fixed-term deposit, or term-deposit account, requires you to deposit your money for a specific amount of time, running from some months to several years. Fixed-term deposit holders aren’t able to access this money during the term in which it is being held.

Banks tend to offer higher-yield interest rates in return for their customers’ commitment. So a fixed-term deposit is a good choice for people looking to grow their money securely, but won’t work for anyone who may need to access their deposit in the short term.

Interest rates on fixed-term deposits are based on the deposit amount and the duration of the deposit. Once a fixed term deposit is locked-in its interest rate won’t change, which shields against decreasing interest rates but also prevents you from benefitting if interest rates happen to rise.

READ ALSO: ‘Move into this century’: How Germany could improve its banking system

Which German savings account type is best for me?

Banks constantly adjust the interest rates they offer customers based on factors like the interest rate set by the European Central Bank, but also based on their own internal calculations, or as a means to compete with other banks.

Also bear in mind, that many accounts will offer a higher rate in the short term, followed by a lower rate after that. For example, many banks will guarantee an interest rate up to 4.5 percent for the first three to six months for new customers, but after those months pass that rate typically drops closer to one percent.

If your goal is to securely grow a deposit in the short term, you’ll want to look for the highest short-term rate. Whereas if you plan to store your money safely in an account for a longer time, you’ll be better off looking for a higher long-term rate or considering a fixed-term deposit.

Which banks are offering the highest yields now?

Keep in mind that it’s always worth looking at some different options before choosing a bank, because the interest rates they offer are changing.

But a good resource to start with is the German economics newspaper, Handelsblatt, which recently published an article comparing some of Germany’s best performing flexible savings accounts.

According to their analysis, Trade Republic, TF Bank, Renault Bank direkt, ING, Comdirect, Consorsbank, Openbank, Commerzbank, Opel Bank, Bigbank and bunq are all offering competitive interest rates of 3 percent or more for customers in Germany at the moment.

Of these bunq, TF Bank, and Commerzbank are known to offer services in English.

Additionally, Handelsblatt looked at fixed-deposit accounts, and compared a number of the top options in Germany side-by-side. In addition to some of the banks mentioned above, they compared fixed term deposit options offered by Postbank, Klarna, Bank 11, DKB, SWK and Suresse Direct Bank among others.

READ ALSO: TELL US – What are the best banking and money saving options for foreigners in Germany?

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TRAVEL NEWS

Should travellers in Germany buy flights before ticket tax hike in May?

The German government is raising an air travel tax by around 20 percent from May. What does this means for travellers?

Published: 26 April 2024 13:03 CEST
Should travellers in Germany buy flights before ticket tax hike in May?

Air travel from Germany is getting more expensive. 

That’s because, from May 1st, the Luftverkehrsabgabe or ‘aviation taxation and subsidies’ air traffic tax is being hiked by around 20 percent. The extra costs will likely be passed onto customers. 

Here are the most important points.

What is the air traffic tax – and why is it being raised?

Since its introduction in 2011, the air traffic tax – also known as the ticket tax or air traffic levy – has generated high revenues for the state. Recent figures show that it brought the government almost €1.2 billion revenue in 2022 and €1.6 billion in 2023.

The move to raise the ticket tax from May is part of German government measures to save money following a ruling on spending by the Federal Constitutional Court last year. The government expects additional annual tax revenue of between €400 and €580 million in the coming years from raising the ticket tax.

READ ALSO: Five budget cuts set to impact people in Germany in 2024

How much is it going up?

All flight departures from a German airport are taxed. The tax currently costs between €13.03 and €56.43 per ticket depending on the destination. These costs are ultimately passed on to passengers.

From May 1st 2024, the tax rates will be between €15.53 and €70.83 per ticket – depending on the destination. 

Here are the additional costs at a glance:

  • Up to 2,500 kilometres – for flights within Germany or to other EU countries, the tax rises to €15.53 per person and journey from €13.03
  • Up to 6,000 kilometres – on medium-haul flights, the ticket tax increases to €39.34 from €33.01
  • More than 6,000 kilometres – for longer flights over 6,000 kilometres, the tax rises to €70.83 from €59.43

Only flight tickets for children under the age of two – provided they have not been allocated their own seat – and flights for official, military or medical purposes are exempt from the tax. 

READ ALSO: Everything that changes in Germany in May 2024

Does this mean I should buy a ticket to fly before May?

It could make sense to book a flight before May 1st if you are planning a trip or holiday abroad. Those who buy a flight before the tax is increased will pay the lower tax – even if the flight is later in the year. 

There is still a question mark over whether the tax can be backdated on the pre-paid flight ticket. However, according to German business outlet Handelsblatt, it would be legally difficult for airlines to demand an increased tax retrospectively.

German travel outlet Reisereporter said this is one reason “why the airlines have not yet informed air travellers of the planned increase in ticket tax”.

What are airlines saying?

They aren’t happy about the hike, mostly because they already feel bogged down by fees and operating costs at German airports. 

The airline association ‘Barig’ has warned that charges at airports and in airspace are already high. According to the Federal Association of the German Air Transport Industry, the departure of an Airbus A320 in Germany costs around €4,000 in government fees, while in Spain, France and Poland it is between €200 and €1,500. These costs are generally passed onto customers,  making buying tickets from Germany more expensive than other places. 

The effects of the increased ticket tax will be most noticeable for low-cost airlines offering budget flights. 

A spokesperson from EasyJet recently told The Local that it was “disappointed with the increase of the passenger tax”, and that the “cost increase will result in higher fares for consumers and damage Germany’s connectivity”.

READ ALSO: ‘Germany lacks a sensible airline policy’: Is budget air travel on the decline?

Meanwhile, the aviation industry is concerned that air traffic in Germany is lagging behind other European countries and is recovering at a slower pace since the pandemic. According to the German Aviation Association BDL, around 136.2 million seats will be offered on flights in Germany from April to September 2024. This is six per cent more than in 2023, but only 87 per cent of the number of seats available before the pandemic (2019).

In the rest of Europe supply is expected to rise above the pre-pandemic level. 

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