A guideline for foreign savers and private investors who would like to invest money in Germany on an overnight money account.
A popular type of investment is the parking of money at which the account holder can dispose of the complete amount daily: hold cash. In Germany the corresponding financial product is called overnight money, Tagesgeld.
What is overnight money?
Overnight money is comparable to call money, daily deposit or day-to-day money. The bank pays an interest rate for the deposits of the customer which the bank can change at any time without previous individual notification. In return the account holder may transfer or debit an arbitrary amount to the account at any time. Some banks determine maximum limits concerning the deposit amount. Only a few financial institutions require a minimum amount to be invested.
The overnight money account
The exact name of the bank account is „Tagesgeldkonto“. The investor who is not a customer of the bank yet can usually fill in an account application form on the website of the bank online. Due to legal regulations as protection against money laundering an identification of the applicant is required. This can be carried out via the so-called Postident procedure. The overnight money account can alternatively be opened in one of the branches of a bank, the identification by presentation of the identity card or passport is also possible there.
The opening of the overnight money account as well as the account-keeping and the identity verification via Postident are free of charge for the future applicant.
This side gives an overview of the top suppliers:
Private customer or business customer
German banks differentiate strictly between private investors who operate the deposit on own account and between business customers. The differentiation occurs predominantly for reasons according to tax law because the taxation of interest income is different between private accounts and business accounts. Generally the interest rates for overnight money for deposits on private accounts are higher than those on business accounts.
Banks differ in the conditions of the interest rates for overnight money
The interest for overnight money is often offered with different conditions. These models are common in Germany:
- The interest rate is valid without restrictions
- The bank does not distinguish between existing customers and new customers. The offered interest rate is universally valid.
- Different interest rates for new customers and existing customers
- It concerns so-called loss leaders: For a certain time, mostly 6 months, new customers get a higher interest rate than existing customers. At the end of this time the usual, lower interest rate (standard interest rate) for existing customers is valid.
- Graded interest rate
The interest rate is graded depending in the deposit amount at which often higher deposit amounts are paid lower interest.
- Guaranteed interest rate
Often only an offer for new customers: up to a certain investment amount (usual: 20.000,00 € – 50.000,00 €) an interest rate for a particular period (usually 6 months, more seldom 12 months) is guaranteed. Nevertheless the customer can dispose of his investment at any time. The lower standard interest rate is valid at the end of the guarantee period.
Combinations of the mentioned models are possible. Interested parties in an overnight money account should select a bank whose offers comply best with the own interest in the financial investment of overnight money.
Consider creditworthiness and deposit protection
In Germany several deposit protection funds exist, which are independent of each other. The membership of a bank to a deposit protection fund depends on the organisational form of the financial institution. In Germany not only German banks but also foreign banks with a German branch office as well as foreign banks without a branch office only via a web page offer an overnight money account. Even if a foreign bank offers only a web page in Germany, this process is subject to approval by the responsible authority, the German federal financial supervisory agency (Bundesanstalt für Finanzdienstleistungsaufsicht, abbr. BaFin).
In the event of damage (e.g. bank insolvency) the owner of the overnight money account must turn to the respective national deposit protection fund to which the bank belongs. According to EU regulation a protection for a maximum of 100.000,00 € per customer is valid for the deposit. German deposit protection funds partly protect considerably larger investment amounts up to hundreds of millions of Euros.
Attention: from 2014 the EU intends to also engage account holders with deposits on overnight money accounts which are higher than 100.000,00 € in the recovery or the resolution of an failing bank (directive establishing a framework for the recovery and resolution of failing banks: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137627.pdf).
First of all investors with larger investment amounts should therefore inform themselves exactly about the creditworthiness of the bank or distribute the amount to several banks alternatively.
Often a German place of residence is a precondition for the opening of an overnight money account.
Not all banks which offer an overnight money account in Germany do this for foreigners, too. But if they still offer it they almost always require a place of residence in Germany (often also the presentation of a proof of residence) and in addition a German reference account.
On enquiry of the editorial staff for example the following banks stated to offer no overnight money for foreign citizens (selection):
Foreigners can open an overnight money account with these banks (selection):
This information is supplied without liability!