Comparison Site: Low Interest Rates at Savings Banks in Eastern Germany

According to an analysis by the comparison website Verivox, many regionally based banks pay only very low interest rates on overnight deposit accounts. In contrast, the analysis shows that national banks offer, on average, more than three times as much interest on overnight accounts as, for example, savings banks, the comparison portal reported. For instance, about one in three East German savings banks offers less than 0.25 percent interest. National banks, on average, offer 1.47 percent interest. The savings banks point to higher costs, deep local roots, and corresponding service across the region.

What exactly do low interest rates cost me?

More than many people think. According to Verivox, anyone who invests 10,000 euros in a money market account for one year at an interest rate of 0.25 percent will earn a total of 25 euros in interest. If the same amount had been invested at the nationwide average interest rate for national banks (1.47 percent), the earnings would have been 147 euros. At the highest interest rate—2.75 percent, which the comparison portal found at a bank in Hamburg—the earnings would have been as much as 275 euros. 

Why are overnight deposit rates at savings banks often so low?

Savings banks and regional cooperative banks have long been significantly more cautious when it comes to overnight deposits than providers operating nationwide. The East German Savings Banks Association pointed to 1,435 branches in Saxony, Saxony-Anhalt, Brandenburg, and Mecklenburg-Western Pomerania. Nationwide direct banks do not incur the costs associated with these branches and the related regional services. Personal advice remains an important distinguishing feature.

Is this a problem exclusive to East German banks?

No, the comparison portal evaluated a total of 819 banks and savings banks nationwide. According to the analysis, in Baden-Württemberg, about 40 percent of savings banks and 34 percent of regional cooperative banks most recently offered interest rates of only between 0 and 0.25 percent; in Bavaria, the figure was as high as about half. It is therefore more of a pattern that generally applies to savings banks and cooperative banks. 

Why are the differences sometimes so large?

In addition to the higher costs for regional banks with their branch networks, there are other reasons for the differences. Banks operating nationwide often face greater competitive pressure. This intense competition is driving overnight deposit rates at the top end of the market ever higher, explains Oliver Maier, managing director of Verivox Finanzvergleich GmbH. On top of that, savings bank customers are often loyal. “They trust that savers won’t withdraw their money even if they could get higher interest rates at other banks.”

Is it worth switching banks?

That depends on the amount invested. If you have several thousand or even tens of thousands of euros in a money market account, a few percentage points can add up to several hundred euros in additional interest. However, if you want to remain flexible with smaller amounts, the differences aren’t that significant. Moreover, many top interest rates are often limited-time promotional offers for new customers, some of which drop after a few months.

What else can I do with my money?

The East German Savings Banks Association points out that a demand deposit account is primarily intended for money that needs to be available at any time. “For those who can set aside part of their savings for a few months or years, other savings and investment options are also worth considering,” explains a spokesperson for the association. The comparison portal also points out that the differences in fixed-term deposit rates are significantly smaller. Nationwide offers with a 2-year term yield an average of 2.64 percent. Savings banks in eastern Germany paid an average of 1.75 percent, and regional cooperative banks paid 1.89 percent interest.