An Overview of German Tagesgeld (Day Money) Banking Accounts

If you find you are staying in, studying in, or visiting Germany for any length of time, you will definitely need a bank account when you are there. Most German bank accounts provide notoriously low interest payments and dividends which has created a need in the German banking market for low risk and high interest accounts like those provided in other countries. This demand has led to the creation of a Tagesgeld Account – which specifically provide the higher interest consumers are looking for along with other features not commonly offered by traditional accounts (Sparkonto).

Tagesgeldkonto vs. Sparkonto

Starting with the word Tagesgeld, which literally translates into “Day Money” we begin to see what a Tagesgeld account provides. Tagesgeld accounts are actually common in many countries and are known by different names like Money Market Fund, Overnight Deposit, Monet-at-Call, Call Money, Day Deposit, etc.

The basic difference is that instead of interest being compounded over certain periods which dictate when you can access your money and whether or not your withdrawal will penalize your interest – Tagesgeld accounts are compounded daily so that there is no penalty for accessing your money at any time. Interest payments are still, by in large, made monthly or quarterly, but because the compound happens daily, a Tagesgeld offers greater flexibility and a higher return of interest.

To be clear, a Tagesgeld account allows holders to access their money whenever they want – without the normal waiting period Sparkontos require. It is important to note that most banks don’t guarantee the interest rates offered on a Tagesgeld for very long. In some cases it’s a short as 3 months, others can offer rates up to a year. Depending on your needs and length of your stay, researching the length of a guaranteed interest rate on a Tagesgeld account is a very prudent step.

The Pros of a Tagesgeld Account

While Tagesgeld or call money accounts have become increasingly popular over the last several years simply because they offer higher interest rates with similar low-risk to traditional bank accounts, they are not for everyone. Before you decide if you need a Tagesgeld account, you should carefully review all of the pros and cons of such an account. The following are pros of using a Tagesgeld account while in Germany:

  • Deposits are typically insured up to several hundred thousand in euros. This provides higher security and lower risk than traditional banking accounts.
  • The interest rates on a Tagesgeld are higher than a traditional account.
  • There are no limitations on requirements to withdraw or penalties on premature withdrawals like other accounts.
  • Money is available around the clock seven days a week.
  • Most Tagesgeld accounts offer account services through both online and branch locations
  • Typically, a Tagesgeld account is free and has no maintenance fees

The Cons of a Tagesgeld Account

While there are a lot of solid positives about a Tagesgeld accounts, there are a few issues you should keep in mind as well:

  • Most Tagesgeld accounts do not offer a long term interest rate guarantee. This is because the interest is most normally set by the banks daily interest rate. This results in fluctuation of the interest rate.
  • Because rates are based off the daily banking rate, that means most Tagesgeld accounts only guarantee for 3 – 12 months. It’s important to know how long the rate is guaranteed for when looking at a Tagesgeld account.
  • You cannot accept or send payments to third parties with a Tagesgeld account.

Things to keep an eye out for when picking a Tagesgeld Account

As when opening any bank account anywhere, all of the conditions, fees (there shouldn’t be any), and terms should be examined thoroughly. To help with that, here is a list of some basic things to keep in mind when it comes time to select a Tagesgeld Account:

Are there Special Conditions for Opening a Tagesgeld Account?
Since banks often offer better rates to attract new customers than they want to pay long term, it’s important to check if there are any deposit, account balance, or other limitations on the introductory interest rate. For example, some Tagesgeld accounts only offer the full rate on deposits until a certain minimum is hit. Deposits after that receive a lower interest rate. Fully investigating any possible conditions or exceptions a Tagesgeld account requires is an important step in choosing the best one.

How often are interest payments made to the account?
Interest is figured daily on a Tagesgeld – but payments are made on a schedule. Learning what the payment schedule is for such interest payments into the account is an important step in the decision process. The more frequently interest is added, the better.

Does the bank offer deposit insurance on the account?
Most Tagesgeld accounts offer insurance on deposits. There is, however, a limit to the size of the deposit that can be ensured in such an account. Only select an account that will always insure 100% of the deposits you intend to make. This is something that must be researched as the limits range anywhere from a hundred to two-hundred and fifty-thousand euros.

Keep in mind – not all providers are equal.
As a last tip – realize not every bank is equal. Review and compare your options. Check out customer comments and websites that rank and contrast the different banks you are looking at. Talk to people who use them, go into the banks and see if you like the branch and if they speak English. Make sure the website is easy to use and works on your mobile device. Remember, it’s not just accounts you are comparing, but institutions as well.

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