Direct banks represent a welcome, consumer-oriented trend in the German banking sector. These are no-frill institutions that have made their mark by enticing investors with higher interest on savings and even current accounts. These higher interest payouts come with a slight disadvantage, however. Direct banks cut costs by reducing service personnel and retail branch offices, you cannot expect the full service you get with the more traditional institutions. Fittingly, direct banks tend to draw customers who conduct their banking via phone and/or the Internet.
Generally speaking, direct banks offer the best interest rates on current accounts, in some cases up to three percent per annum (although several traditional banks are now offering attractive interest on current accounts as well, in a bid to keep up with the more consumer-oriented trend). But, depending on each customer, the many advantages at first sight of choosing a direct bank over a traditional one may vanish when taking a closer look. While many direct banks do not charge any maintenance fee, some charge up to 10 euros per month or only pay high interest to clients who keep a certain minimum amount in their accounts.
When choosing your direct bank, you should also make sure that some of your bank's ATMs are located in your neighborhood or near your office. Some direct banks have very few ATMs at their clients' disposition, meaning that the fees charged to withdraw from another bank's ATM (sometimes more than 4 euros) may represent a more substantive sum than those incurred for having an account with a traditional bank. A number of banks have agreements for ATMs (CitiBank, Santander, SEB, and Sparda are all linked in the www.cash-pool.de system , while Deutsche Bank, Dresdner, Commerzbank, Hypovereinsbank and Postbank are in the www.cashgroup.de system) which allows for free withdrawals at each others cash machines.
Online banking is extremely popular in Germany. The advantages are many: all transactions can be done from your PC and the per transaction fee is usually lower. The simplest and cheapest way to bank online is to log on directly to the bank's website. The bank will issue you a list of transaction numbers (or TANs), which will be needed to process any banking business. Remember that each TAN can only be used once. It is important to note that not all banks use the TAN list system - some have migrated to a SMS system while others require the purchase a pocket-sized TAN generator unit.
There are a number of other ways to bank online. Telekom's T-Online offers a good software package that comes free with the basic membership and works with all banks in Germany. You can also use one of the commercial software packages such as Quicken (which costs about 50 euros) and offers a variety of convenient functions. But whichever way you choose to manage your finances, it goes without saying that protecting yourself from electronic fraud is paramount. Online transactions should only be carried out from your home computer and it is advisable to keep your TAN list in a safe place.
Once you have actually opened a current account (and here is where you learn why it is so important to have one), you will be sent transfer forms. Most payments in Germany are made via direct transfer from one account to another. When checks are used, it is usually in the form of Eurochecks (see below).
The transfer forms you will receive come in duplicate layers, with anything written on the top sheet automatically copied onto the lower two. When you want to make a transfer payment, you just fill out the name of the recipient (Empfänger), his/her account number (Kontonummer), and the bank sorting code of the recipient's bank (Bankleitzahl). You then tear out your copy (the one that says Auftraggeber), and turn the other sheets over to your bank (by mail or by dropping them off at your bank), which will process the transfer. Many businesses will facilitate matters by including their own prepared transfer forms with all invoice mailings. In such a case, you merely have to fill in the name of your bank, its sorting code and your account number and, as before, turn this over to your bank.
Please note that if you make a cross-border transaction to another bank within the EU, be sure to use the recipient's IBAN/BIC code so that you do not incur any needless fees.
For payments of ongoing bills, such as utilities, insurance payments, rent, telephone, tax remittances, certain membership fees and magazine subscriptions, it is in many ways highly advisable (and convenient) to set up a standing order. There are two types: Einzugsermächtigung, which gives your billing party the right to debit your account directly at regular intervals; or Dauerauftrag, which specifies a set amount to be transferred to the billing party at a frequency you determine.
The advantage with these systems is that you never have to worry about missing a payment (for instance, if you are away on holiday or emergency leave). A standing order can save you from a penalty fee for late payment or, worse, the embarrassment and extreme inconvenience of having a utility switched off for non-payment. The latter can be particularly painful, as it could entail additional fees for both suspending and reinstalling the service!
Of course, the Einzugsermächtigung, by giving the billing party the right to determine to draw from your account, is also dangerous if misused by irresponsible parties. You should therefore exercise extreme caution when granting this power. Reputable, established companies are fine, as are all government agencies and utilities. If these organizations should make a mistake, they will adjust it rather quickly in your favor, sometimes with interest. You just have to be careful giving the account-dipping privilege to fly-by-night firms that could use your financial information in an unscrupulous way.