Reported by Chinese in Germany｜Europe in the era of negative interest rates: Saving money not only has no interest, but also has to pay "penalties"

Author/Ding Ding (from Suzhou, has been in Europe for many years, now lives in Berlin, Germany)

〖Editor's Note〗 We have witnessed history again. On July 21, local time, the European Central Bank announced an interest rate decision, raising the three key interest rates by 50 basis points, exceeding the previously expected 25 basis points. This rate hike was the first since 2011, and the rate hike was the largest in the past 22 years. This interest rate hike also announced the end of the eight-year era of negative interest rates in Europe. Analysts said the interest rate hike was mainly to deal with the increasingly serious inflation in the euro zone.

For ordinary Chinese, it may be difficult to understand what negative interest rates on bank deposits are like. The author of this article has lived in Germany, a country with a relatively good economy in Europe, for many years. Under negative interest rates, what is the relationship between ordinary people and banks? Do people take the money and deposit it in the bank? How to manage money? How do home loans and car loans work? Now, let's listen to her talk about the lives of ordinary people in Europe in the era of negative interest rates.

The European Central Bank headquarters in Frankfurt. Photo by Ding Ding

Five years ago, I worked in the international office of a business school in Germany and received a domestic bank team. One of them asked me out of curiosity, how much interest would there be on depositing money in a bank in Germany? I was immediately asked.

In my impression, it seems that Germans and even most European countries have never had the concept of collecting interest on deposits, and they don't care much about the interest rate on deposits in their own accounts.

For my own account, the deposit interest rate is so low that it can be ignored. As time went by, I almost forgot that depositing money in the bank to collect interest is also a very important way of managing money in China.

The streets of Berlin, Germany.

Before writing this article, I checked again and found that the interest rate on my current account had dropped to zero. Fortunately, I have a certain amount of income coming in every month. Otherwise, according to regulations, the bank would charge a few euros in management fees every month.

Not only can you not earn interest by saving money, but you also have to pay money back to the bank. This is unimaginable in China.

Not only the bank where I opened an account, but also the deposit interest rates of other banks are appalling. Even looking at neighboring countries, the best interest rate I found is 0.8% offered by an Italian bank for time deposits of less than 100,000 euros. This is the data from a year ago. Now that Europe has announced an interest rate hike, it is expected to increase a bit. ?

Within Europe, Germans are famous for their love of saving money.

According to statistics, more than 80 million Germans have 2.3 trillion euros in their accounts, which is not much different from the Chinese who are known to love saving money most. According to the latest survey, only 17% of Germans live on their own and do not save any money at all. More than half of Germans save between 50 and 400 euros every month.

Of course, due to high taxes and high consumption, only 1% of Germans can save more than 1,000 euros per month.

In addition to loving to save money, Germans are also notoriously conservative in their attitude toward investment. Many people just save their money without making any other financial investments. When buying a house, you are afraid of going into debt, and when buying stocks, you are afraid of falling prices, especially now that we don’t know if there is a bubble in house prices and the stock market is also in turmoil.

I have seen a street interview with a German media. Many people said that even if there is no interest in bank deposits, they would just keep it and not do financial management.

At the local flea market in Berlin, some people are selling small commodities.

If zero interest rates can be tolerated, then collecting deposit management fees is really "strength to persuade you to quit."

In recent years, German banks have introduced charging policies in order to maintain profits. Unless there is money in the account every month, they will charge a management fee of more than 5 euros, which will be dozens of euros higher in a year. . Therefore, except for the bank accounts necessary for daily life, most people have canceled all unnecessary accounts. According to reports, after Commerzbank announced charges last year, canceled accounts suddenly increased ninefold. The cancellation rate of online bank Comdirect was 250% of the 11-week average.

Supermarket in Berlin, Germany.

Today, most countries in Western and Northern Europe have entered the era of cashless payments, but Germany is still a cash country.

In addition to depositing money in banks, Germans also like to keep cash at home. Needless to say, saving euros, the most unexpected thing is that after 20 years of euro circulation in Germany, according to statistics from the Bundesbank, the German private sector still holds approximately 5.77 billion marks in banknotes and 6.61 billion marks in coins.

According to law, these German marks are no longer circulating in the market, but they can be exchanged indefinitely at the Bundesbank. Every year, people find marks in drawers, sacks, shopping bags, and even between books, and then run to the central bank to exchange them.

In 2019, a young man was preparing to sell the house of his deceased uncle because he had to pay a large sum of money. However, he accidentally discovered that there were 3.5 million marks hidden in the house. Almost two marks can be exchanged for 1 euro. It's like making a huge fortune, and there's no need to sell the house.

In 2020, the Bundesbank exchanged 53.4 million marks in old currency for the people in one day. In addition, there are a considerable number of Germans who are not in a hurry to convert marks into euros and keep them in their hands.

A construction site in Berlin. In terms of income, local housing prices are not expensive, but not many young people in Germany are willing to buy a house.

While deposit interest rates are low, financing interest rates are also low. The advantage for ordinary people is that the interest rate on home loans is much lower than in China.

Taking a mortgage with a 10-year bonded interest rate as an example, the loan interest rate 20 years ago was around 6%, and 10 years ago it remained at 3% to 4%. In the past five years, 10-year mortgage interest rates have fallen to 1% to 2%. At the same time, due to the influx of a large number of foreign immigrants, the balance of supply and demand in the rental market has been broken. Especially in big cities like Berlin, it is often difficult to find a house.

As a result, wealthy people from Eastern Europe, immigrants from China and India, including a small number of Germans, bought houses and bought cars one after another.

However, there are many German friends around me who would rather continue to rent even if they have the ability to pay.

Residential quarters in Germany.

I asked two German friends who are in their 30s and have stable jobs, why not take advantage of the low down payment and low interest rates to buy a house of their own.

According to their economic conditions, they can take out a loan to buy a small apartment of about 300,000 euros, and the monthly loan repayment may be cheaper than the rent. One of them told me that he didn’t want to go into debt for a house at such a young age, and what if he had to change his life in another city in the future!

Although the other one thought about buying a house, according to his own financial conditions, She can only buy a small apartment, but she wants to buy at least three bedrooms and one living room in one step to live more comfortably.

The neighborhoods in Frankfurt, Germany are also very lively at night.

This year the Russo-Ukrainian war broke out, inflation in Europe intensified, and banks generally became much more cautious in lending. Especially in the past two months, Germany's mortgage interest rates have suddenly risen to 3%.

Because of the rising prices of raw materials, housing prices are still strong and there is no trend of price reduction. Of course, buying a house is not as easy as it was in previous years, and many people missed the opportunity to buy a car. Not only that, but saving money is becoming increasingly difficult due to rising prices.

Of course, when it comes to negative interest rates in Europe that have lasted for 8 years, it is basically a worry for the rich.

For example, in the era of negative interest rates, many major banks in Europe announced that they would charge an interest rate of 0.5% as a penalty interest on accounts with deposits exceeding 100,000 euros. In other words, if you have 100,000 euros in your account, you will have to pay 500 euros to the bank in one year, which is more than 10 times more expensive than the management fees that ordinary people pay to banks.

Some banks will even lower the penalty interest threshold to 50,000 euros. As a result, people with large deposits have to withdraw cash in order to pay less, or store the money on different bank cards and only pay management fees.

However, these penalty interest policies do not have that great impact on wealthy people who make money wisely. A rich friend once told me that after he earned money, he invested it and only kept more than 10,000 euros in his bank account for daily turnover. As for the specific investments, they are tight-lipped.