Switching German Bank Accounts Is Easier Than You Think
Continuing on from last week’s introductory post on banking, as part of the LWG mini-series of posts on banking, we explore this week the topic of switching German bank accounts and walk you through how, thanks to a new law, it is easier than most people think.
Us expats often don’t choose the best deals at first, mainly for reasons of expediency and the need to have a bank account set up quickly after relocating here. Another common problem is not being accepted by the bank of their choice as a newcomer because you do not have a German credit history with SCHUFA.
This post has drawn heavily on a recent article in German consumer magazine Stiftung Warentest, June 2017 edition “Finanztest”, for those of you who understand German and would like to read their report in full.
How did you select your current bank?
The chances are, when you first arrived in Germany, you had very little knowledge of the products and services offered by different banks here. Most likely you opened a bank account either based on what your colleagues, friends or German partner advised you, or you chose the bank with a branch located conveniently close to your home or workplace.
For expats in Germany, especially amongst those who have limited German language skills, the most common problem when it comes to choosing a banks is lack of knowledge of what options are out there. Without a good understanding all of the different product offerings and services on offer, it is difficult to make an informed, data-driven decision.
If you lived here for a while now, and are kicking yourself for opening a German bank account with somewhere that has crappy customer service and inconvenient opening times, the good news is that switching German bank accounts has become easier now than ever!
“Switch Your Account In Less Than 10 Minutes!” Really? Well, No.
A new law which came into force in September 2016 allows consumers to switch bank accounts much easier than was previously the case. Claims made by some banks’ advertising that you can “switch your bank in less than 10 minutes” are, however, in our opinion, extremely optimistic.
Banks must now offer a service which automates and performs the annoying, administrative tasks which put most people off switching their banks. The law stipulates that the customer’s incumbent and new bank must cooperate with each other and enable a simple and fast account switching service with easy access to recent transaction history.
Furthermore, both banks are liable for compensation if anything going wrong during the switch. However, this is only valid if it is a task which is their responsibility for carrying out on the customer’s behalf during the switching process.
An example: If a direct debit is not set up properly for a contract or loan repayment and the customer incurs a penalty or interest, according to the law, then the bank must take liability (obviously this is subject to you having given them the correct details in the first instance!)
How does it work?
The infographic below walks you through the process of how to switch your bank account in Germany in 8 steps.
Everything Is Done Online
Whilst it is also possible to carry out the account switching service in branch, the law is primarily directed at consumers who would carry this out online. This online service should be free on all banks’ websites.
Switching in 10 minutes may be unrealistic, especially for somebody navigating a German website with limited knowledge of the language. However, that doesn’t mean the process is complicated. Even if you are dependent on a website translation tool such as Google Translate, this process from start to finish should be possible within 1 hour.
After applying for your new bank account, you then have to go to the account switching service on their website (Kontowechselservice). All banks based in Germany will offer this online. Normally this will be found in the personal banking area after you have logged into their site.
NOTE: You cannot do this until you have opened an account and your new bank has provided you with an online banking user ID.
Once you are inside the account switching service on your new bank’s website, your incumbent bank must provide an overview (online, on the new bank’s site, through selecting your old account’s details) of all transactions from the past 13 months.
Doing this online is free of charge. What’s more, many banks also offer sign-up bonuses for new customers opening current accounts, so it may just be the most productive hour you have spent in a while! The follow-up article to this one explores pros and cons of various accounts and the terms upon which you will be paid a sign-up bonus…look out for this in a couple of weeks time.
If you know which bank you want to switch your account to, and have noted down the direct debits (Lastschriften) and saved payments (Überweisungsvorlagen) from your current bank account that you need to switch across, then it is relatively straightforward. That is, if everything goes to plan…
What Could Go Wrong?
So that’s the theory. There are, however, a few areas where this seemingly simple process could get stuck in the mud.
1. Direct debits vs. one-off payments: In the list of transactions from the past 13 months which your current bank is obliged to provide, any and every electronic payment will show up in here. Only you are able to know what is an important, recurring payment to be transferred to the new account e.g. rent, gym membership, internet, versus what are one-off payments e.g. groceries, petrol, meals out etc which are not relevant.
2. You need the transacting partner’s address info: You must provide an address of the transacting partner for your new bank to write to them and inform them of the change in account details, in order for payments to continue uninterrupted after the switch. This is not always obvious from your bank statements, so may require some preparation in advance.
3. Issues with standing orders (Daueraufträge): According to Stiftung Warentest, regular, scheduled standing order payments are not easy to transfer using the banks’ online switching service. The most simple way to do this is to manually cancel them with the current bank and set them up with the new bank.
4. Online payment providers: The likes of Ebay, Paypal and Amazon require you to amend your bank details in your profile on their website. Your new bank is not authorised to do this on your behalf.
5. (Non-)Acceptance of digital signatures: Some transacting partners may refuse to accept digital or scanned signatures. You may therefore receive correspondence asking you to confirm with an ink signature and return the letter by post.
So why don’t more people switch?
Why don’t most people find a new job when they don’t like their boss?
Why don’t most people move home when they don’t like their apartment?
Like most things, because it’s easy to maintain the status quo. There is still the common misconception that switching bank accounts is a complicated and long-winded process. Yes, it involves some preparation work in advance, and the onus is on you to figure out which is the best bank to switch to. However, I hope with this overview I have shown that the actual switching process itself is not specifically complicated, thanks to this recent change in the law.
Hopefully we have made your life a little easier with this article and we want to help a bit further with the next post. There we will take a look at a few options for bank accounts and advise which ones in our opinion are the best, depending on your circumstances and personal preferences. If you don’t want to miss it, sign up for our email list below!