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I recently moved to Germany, and I was shocked to discover that almost all of the credit unions (Kreditvereine) and banks here charge a fee just for me to give them my money. Why?

Background: I'm from the US. In my country, there's about 2,000 credit unions that are members of CO-OP Financial Services. Every credit union I've ever joined charges a one-time fee of $5, and the account is free forever (Kostenloses Girokonto) after that.

These credit unions are, by definition, owned by their members. So, of course, the members vote to not have to pay monthly or yearly fees. And why should they? They're non-profits that can easily exceed their expenses by reinvesting their member's fluid assets (usually in micro loans that benefit the local community and bring them revenue).

When I arrived to Germany (which is actually the birth place of the idea of credit unions), I found that almost 100% of the banks here charge a fee just to have an account with them (with few exceptions for students and minors and some fintech banks). Many have fees to use ATMs or just to withdrawl cash from a brick-and-mortar. It's insane!

My understanding is that the most popular credit unions in Germany are

  1. Volksbank (with 841 branches) and
  2. Sparkasse (with 16,500 branches)

My question is: why do Germans allow their credit unions to charge them these fees? Why wouldn't they just vote to eliminate these fees?

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    Sparkassen aren't owned by their members, but by the respective city or county. I wouldn't count them as CUs. I'd count as CUs primarily Volksbanken and Raiffeisenbanken, as well as Sparda-Banken (which actually offer free accounts to their customers) and some others. They are called "Genossenschaftsbanken" and indeed owned by their members. Why they don't vote to have the account for free I don't know. Probably because the services have to be paid somehow. – glglgl Feb 24 at 20:01
  • Are you sure Sparda-Banken offers free accounts? It looks like their free account is only available if you're under 30 years old sparda-b.de/konten-karten/konto-free.html – Michael Altfield Feb 24 at 20:35
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    Most banks in Germany, recently, raised their fees. How could credit unions work for less money? – Bernhard Döbler Feb 24 at 22:41
  • @MichaelAltfield When I had an account with them, it was completely free, but it was the Sparda Südwest. (sparda-sw.de). Things might have changed, however. – glglgl Feb 25 at 6:32
  • Sparda SW has introduced a 5€/month last fall. Basically only the "internet banks" still offer free giro accounts – Manziel Feb 25 at 8:14
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The simple answer is "because many people do not care enough". There are still some (internet) banks that will offer you a giro account for free, though most of them require you to have a certain monthly income payed to this account.
The banking business is - as all services - subject to competition. If people do not care about finding a cheap bank...welll...banks will charge you for having an account. Simple as that.

However, there is another side of the story. In the not so distant past, when interest was still positive, the bank could get away with giving you 2% for your money while making 4% with the money you deposited. In the age of zero and negative interest, they do not really gain anything on your money. There is simply not enough safe investments that offer an attractive rate (even the mortgage business is down to around 1% at the moment). Therefore banks will try to earn money a different way, e.g. by rasing fees.

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why do Germans allow their credit unions to charge them these fees? Why wouldn't they just vote to eliminate these fees?

Keep in mind that not every customer of a credit union is also a member. Sure, they have lots of members, but e.g. "my" Volksbank's lists about 60 % more customers than members. So in general, it may not be in the interest of the members to offer zero fee accounts. I've heard that some Volksbanken offer lower accounting fees for members, though.

Others have explained that zero fee on checking accounts/Girokonten have/had been around for a while, but in the last few years banking fees have been increasing in general.
You may expect Volksbanken to be rather on the high side with their fees since one of the services they sell is that still run a rather extensive network of physical branches. Not every village any more, but for sure lots of small towns (my village had their branch closed many years ago, the neighbor village still has one)

What is still rather common is that the monthly fee is reduced under certain conditions, such as agreeing to receive your mail electronically and meeting a minimum amount of incoming money monthly or quarterly. Often, this does not need to be money coming in from an external source such as an employer or pension. Personally, I set up the required amount to circulate automatically between my two checking accounts. This keeps both accounts in a low(er) fee state. The money employed for this has a very good "ROI". BTW, this is not sneaking aroung the banks' rules, this was very officially suggested by the bank when I spoke to them what to do against the fees.

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My experience, in the US, is that Credit Unions do not necessarily have better rates than regular banks. There was a time they did but the banking industry has seem to normalize. I found this while shopping for banks over the past 5 years or so.

I found the best deal for me, initially was a reginal bank. Through several mishaps and attempts to solve mistakes that they were making regularly, I decided to go with a big, well known bank. The kind of bank I would have historically avoided due to high fees.

This big bank, despite my prejudice, offers me free checking and free checks with no minimum balance or other requirements. In fact they even pay a low interest rate on my checking account. They meet my needs very well and I am very happy.

Contrast this to a large local credit union. In order to have my checking account fee waived, I need a direct deposit monthly and a minimum balance. For a while I was being paid quarterly so 8 months out of the year I would have had a fee. Plus they have fewer branches if I had to deposit a physical check or get money from an ATM.

Perhaps the regulatory requirements are much higher in Germany, so those are past onto the consumer. Perhaps the credit unions are not free but of much lower cost. It is hard to say.

The best thing you can do is find a bank that meets your needs and pay as little as possible for that service. We do this with mutual funds and are okay with it.

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    idk, I have acquired accounts at several distinct US-based credit unions over the years, and they're all free with no minimum balance. I've never been charged a fee, and some of them even credit my account if I happen to get charged a fee by an ATM operator anywhere in the world (atm rebates). Why? Because their members wanted it and voted to make it so. – Michael Altfield Feb 24 at 19:27
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I cannot tell for sure, but the idea of a non-fee account is quite new in Germany.

When I was young, before the Online Era, there used to be a Sparkasse in every village and a Volksbank or Raiffeisenbank in every second village. In cities and towns, there were several Sparkassen and Volksbanken in every quarter.

So that was where people usually were clients and what they were accustomed to.

They usually charged fees, except maybe for students.

Later on, there were the banks with free accounts, and the young people went there while older (or more conservative) people remained where they were.

And now, in the times of low interest rates, many banks cannot help but charge fees.

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While the US federal reserve still puts a low but non-zero (0.25%) interest rate on the US$, the European Central Bank currently has a zero interest rate on the Euro. That means European banks currently do not make any money whatsoever just from having customer money in checking accounts. Sure, credit unions are non-profit, but they still have to cover their costs for infrastructure and personnel. So they have to find other ways to generate revenue from their private customers. That's either transfer fees, flat monthly fees or a combination of both.

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  • "That means European banks currently do not make any money whatsoever" how does this prevent a European CU from lending out their members' liquidity with small business loans to their local community at an interest rate that meets their operational expenses? – Michael Altfield Mar 2 at 16:35
  • @MichaelAltfield Why would they pay private customers for that while they can get money for free from the central bank? – Philipp Mar 2 at 16:49
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One reason could be that in the US banks can ‘pick’ their customers, and will typically not accept ‘expensive’ customers (low credit score, many issues).
In Germany, banks are legally required to offer their accounts to anyone who wants them, including people that produce more cost than they bring money.

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    credit unions usually don't redline in the US. – Michael Altfield Feb 24 at 20:59

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