What is the purpose of a current account?

You will need a current account to make and receive cashless payments and to conduct numerous other banking transactions. Wages or other income, such as pensions or maintenance and support payments, are normally paid into this account. You can also use it to pay your bills by bank transfer, standing order or direct debit, or to transfer money to other accounts. If you need cash, you can make a withdrawal from your current account. In addition, you can nominate your current account as your reference account for credit cards, securities transactions or loans, or have money from your savings paid into the account.

A current account is less suitable for investment or savings purposes because you will not receive much (if any) interest on your balance. Remember that interest on funds held in your current account is regarded as investment income and is thus taxable.

Is there any kind of protection for the money held in my current account?

In Germany, the statutory deposit guarantee scheme protects balances on current accounts, overnight accounts and savings accounts up to the amount of €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. The deposit guarantee is similarly regulated for banks in other member states on the basis of an EU Directive.

For amounts in excess of this, in Germany the voluntary deposit guarantee schemes of the various banking associations may offer protection. We strongly advise that you make your own enquiries in order to avoid any risks.

You should also think carefully before opening a current account with a provider outside the European Union due to the insolvency risk.

Can I overdraw my account?

Setting up an arranged overdraft will enable you to overdraw your account up to a certain amount. You can agree upon an arranged overdraft with your bank, although you are not automatically entitled to one. The overdraft amount will depend on how much money is regularly paid into the account and, first and foremost, on your salary. Interest rates on arranged overdrafts are variable and can be changed by the bank at any time. Ask your bank about the current interest rate to avoid unpleasant surprises.

Remember that arranged overdrafts are the most expensive way to borrow money. You should use them only for covering short-term liquidity needs, if at all. You should not use an arranged overdraft if you need a large amount of money that you cannot pay back quickly. An instalment loan would be more suitable in this case.

The advantage of an arranged overdraft is that you may use it at any time up to the limit. If you use your overdraft, you are borrowing money – which means that you are entering into a loan agreement.

An unarranged overdraft is a different matter. As opposed to an arranged overdraft, an unarranged overdraft is neither explicitly granted by the bank nor covered by an existing agreement between the bank and the customer.

As a rule, banks set internal limits for unarranged overdrafts. Customers are not automatically entitled to an unarranged overdraft that exceeds the agreed limit.

In general, the interest rates on unarranged overdrafts are higher than those on arranged overdrafts.

Where can I open a current account?

You can open a current account at a branch-based bank or with a direct bank. Direct banks do not have brick-and-mortar branches and communicate with their customers exclusively online, via app and in some cases by phone.

Banks offer a wide range of current account models with various price structures and additional services. You should therefore take the time to obtain detailed information and to seek advice if you need it. Such information and advice can be obtained from the banks themselves, either in-branch, online or by telephone.

In order to open an account as a new customer at a bank, you will have to prove your identity. You will therefore need a valid identity document. You can present your identity document in person at branch-based banks. Direct banks mostly verify identity via webcam (video identification procedure) or at a post office belonging to Deutsche Post (“Postident” procedure). Branch-based banks also offer these options.

What fees are charged for a current account?

Current account fees may vary considerably depending on the bank and account model. Some institutions, mostly direct banks that do not operate a branch network, do not charge account management fees. This is normally contingent on the account holder making regular monthly minimum payments into the account. It is also often the case that young people are not charged any account management fees.

Alongside the account management fee, other fees may be charged, such as for a girocard, cash withdrawals at ATMs, paper-based transfers or printed bank statements. This also depends on the bank and the account model that you select.

Current accounts with higher account management fees often include more services, e.g. a credit card, paper-based transfers or an unlimited number of cash withdrawals.

All German credit institutions are required to inform their customers of the particular features of their products and the corresponding prices before concluding a contract. Information on how much a bank charges for current account services can be found in the bank’s schedule of prices and services. Before concluding a contract, you should also read the general terms and conditions.

Are banks obliged to open an account for me?

Whether or not a bank opens an account for a customer is a decision for the bank to make based on its own business policies. However, if the bank rejects an application by a customer who does not yet have a current account and is thus unable to make cashless transactions, the customer is entitled to a basic payment account. Banks are obliged by law to offer a basic payment account under certain conditions.

How can I switch or close my account?

You can close your current account at any time. While a notice period may apply, any such period may not exceed one month.

If you switch your account, you need to make sure that your payment obligations are still met and that you continue to receive payments. During the account switching procedure, all customers are entitled to receive support by the banks involved if they wish. Beyond this legal obligation, many banks offer additional voluntary support services.

How are banks supervised?

BaFin has to grant domestic banks authorisation to offer current accounts. German banks are supervised by the Deutsche Bundesbank and BaFin and, if they exceed a certain size, also by the European Central Bank (ECB) within the scope of solvency supervision.

BaFin nevertheless does not supervise current account fees and the associated services on offer. As a supervisory authority, BaFin cannot make legally binding decisions on individual rights or claims stemming from a business relationship, or enforce these claims on behalf of individual customers.

In the case of foreign institutions and institutions that are not subject to German supervision, consumers may experience some difficulties. For example, complaints might only be accepted in the local language or there may be different legal frameworks and liability limits.