Germany’s Cash Culture: “Geld stinkt nicht”


In Germany, Cash is King

North Americans are often frustrated by the lack of credit card acceptance in Germany. Americans and Canadians, so used to paying with plastic, are dismayed to discover that once they stray from the tourist circuit, their AmEx, MasterCard, or Visa credit cards are often useless in German-speaking Europe. It’s another cultural difference, and it’s not a minor one. You need to wrap your head around the fact that cash is king in Germany, Austria, and Switzerland. As the Germans say, “Geld stinkt nicht.” (“There’s nothing wrong with money.” lit., “Money doesn’t stink.”)

Euro banknotes

Euro banknotes range from five to 500 euros. Notice that, unlike US bills, euro banknotes also vary in size. PHOTO: ECB

The Bundesbank, Germany’s central bank, recently estimated that 79 percent of financial transactions in Germany are settled in cash, while in Britain and the USA that figure is under 50 percent. A typical German walks around with the equivalent of about $123 in cash in their wallet, nearly twice as much as Australians, Americans, the French or the Dutch typically carry. There is little talk of a “cashless society” in German-speaking Europe.

Many people have searched for an answer to why Germans (and the Swiss and Austrians) are so much more in love with cash (Bargeld) than most other nationalities. The use of cash for most transactions seems to be deeply ingrained in the German psyche. Children grow up in Germany’s cash culture, and as adults they think nothing of paying a bill of 500 euros or more with paper money. And they can do that with a single banknote, the 500-euro bill that was created as a concession to Germany to ease the pain of giving up the Deutsche Mark (DM). The 500-euro note, worth about $570 today, replaced the popular 1000-DM bill. Switzerland still has its 1000-franc (CHF) banknote, the largest denomination bill in the world, and today worth just a little over 1000 US dollars. We’ll discuss more aspects of these giant banknotes below.

Possible reasons for the German passion for cash vary from the German love of privacy and anonymity to the historic encounters with hyperinflation in the Weimar era, and after World War II. Germans also claim that by using cash, they are better able to keep track of their finances and avoid debt. (The German love of using cash is countered by an intense hate for debt.) Other observers claim cash offers a good way for Germans to avoid taxes with off-the-books cash transactions.

Whatever the reasons, as anyone who has visited or lived in Germany knows, the way Germans handle money is very different from the way North Americans do. Germans love cash and are averse to credit cards. Even checks, so popular in France, are a rarity. The German banking system offers a suberb system for transferring money – via a Geldüberweisung – from one account to another. Most Germans pay their monthly bills online this way, but when it comes to in-person purchases, even in a German department store or restaurant, cash is still king.

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GERMAN MONEY EXPRESSIONS

Geld stinkt nicht. | There’s nothing wrong with money.
Geld regiert die Welt. | Money makes the world go round.
Mit Geld geht alles. | Money talks.
bar auf die Hand | cash on the barrelhead
bares Geld | cash
das Bargeld | cash
bar bezahlen | to pay cash
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Another popular payment option is the EC bank card, often used for buying something in a store or business. However, an EC (Electronic Cash) card, also called a GeldKarte, is not a credit card. Like a debit card in the US, the money is transferred immediately from the EC cardholder’s account to the seller’s account. Unlike a US debit card, the EC card does not also double as a credit card. You have to have a German or European bank account in order to get and use an EC card (also known as a Maestro card), and you can’t get a bank account unless you are a registered resident.

Germany’s Cash-Limit Controversy
Many countries in Europe have a legal maximum amount for cash transactions, but that is not the case in Germany. A recent proposal to introduce such a restriction in Germany quickly drew strong negative reactions. Again, the German love of cash plays a role here. A recent survey by YouGov revealed that 72 percent of Germans think it is “safer” to pay with cash.

So in February 2016, when the German finance ministry proposed a ban on cash payments of more than 5,000 euros to combat money laundering and the financing of terrorism, many Germans fiercely denounced the idea. After that, and another proposal to eliminate the 500-euro note, even Bundesbank President Jens Weidmann distanced himself from the government’s recommendations, telling a German newspaper: “It would be fatal if citizens got the impression that cash is being gradually taken away from them.” Weidmann also published an unusual 22-page defense of the use of cash, and warned: “If we tell citizens the bank notes they currently hold are not valid, that would impact trust.” But the final decision on the 500-euro note is up to the European Central Bank, headquartered in Frankfurt, Germany.

500-euro bill obverse

The 500-euro banknote is the highest denomination euro bill. PHOTO: ECB

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Cash Transaction Limits by Country
The following EU countries impose a legal limit on cash transactions that is lower than the European Union’s recommended 15,000-euro cut-off. Germany and Austria currently have no limitations on cash transactions.

• FRANCE: €1000; non-residents: €10,000 (since Sept. 2015)
• GREECE: €1500
• ITALY: €3000, since 2014 (was €1000 from 2011 to 2013)
• SPAIN: €2500; non-residents: €15,000
• SWITZERLAND: 100,000 CHF, as of spring 2016
Note: Switzerland is not an EU member nation.
______________________________________________________________________

Reacting to the proposed cash limitations, the popular German tabloid Bild published an outraged open letter entitled “Finger weg von unserem Bargeld!” (“Hands off our cash!”), citing five reasons why cash is the superior payment option:

  1. “Cash means freedom! Germans love cash. They pay for four out of five purchases with bills and coins.”
  2. “Cash keeps the government from treating us like children. Today the proposed cash limit is 5000 euros – and tomorrow?”
  3. “The cash limit puts all citizens under suspicion.” [It assumes that] “…if you have more than 5000 euros in cash, you couldn’t have earned it honestly.”
  4. “Cash always works, technology doesn’t!”
  5. “The reasons for the cash limit don’t hold water.” As an example, the letter quotes Prof. Friedrich Schneider of Austria’a Johannes Kepler Linz University, who claims that the 5000-euro limit would only reduce off-the-books work by about two percent. Bild also points out that crooks and money launderers use digital/electronic methods to steal and move millions of euros, far more than cash can possibly allow.

New Swiss Cash Limits
The Swiss are also diehard devotees of cash. With the unveiling of the redesigned 50-franc (CHF) bill in April 2016, Swiss National Bank Chairman Thomas Jordan was asked why the Swiss were devoting so much time and energy to their paper currency, when the future of financial transactions seems to be electronic and digital. (The new 20-franc note design is set for 2017.) Jordan responded: “Despite rapid technological developments in the payments arena, cash has yet to be superseded; indeed it is still a widely used and popular option in Switzerland.” The bank chairman added that cash is widely used not only in Swiss shops and restaurants but also for larger purchases, including buying a car.

50-franc banknote - uncut

Uncut sheets of the 2016 issue of the redesigned Swiss 50-franc note. PHOTO: SNB

Until recently, Switzerland was like Austria and Germany when it came to cash transaction limits. There were none. But with pressure from the forces opposing money laundering, the underground economy, and the financing of terrorism, the Swiss government approved a new cash limit of 100,000 Swiss francs in 2016. Although the Swiss limit is much higher than those in other countries, it is a limit the Swiss did not have before.

CTR and SAR Reporting in the US
While technically there is no limit on cash transactions in the United States, there are American laws and regulations that affect the use of cash. Under the 1986 Money Laundering Control Act, US financial institutions are required to file a Currency Transaction Report (CTR) for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000. In 1996 the Suspicious Activity Report (SAR) was added. Such reports are usually filed electronically with the Financial Crimes Enforcement Network (FinCEN), an agency of the United States Department of the Treasury.

CASH, MONEY and CREDIT CARD FACTS
Sources: Bundesbank, US Federal Reserve
Below are some interesting facts related to the use of cash, coins, and credit/debit cards in German-speaking Europe and North America.

  • Although cash is king in Germany, many small shops, cinemas, and even some larger stores will not accept payment with high-denomination notes (50-euro or 100-euro bills). Why? They want to (1) avoid counterfeit-bill losses and (2) avoid running out of change.
  • The average German wallet contains $123 in euros, almost twice as much as the average American’s $74.*
  • Coins: The American quarter (25 cents) is unusual in the world of money. Like most currencies in the world, the euro has 1, 2, 5, 10, 20, and 50-euro-cent coins, but no 25-cent coin. (There are also one-euro and two-euro coins.) Each euro coin displays its value as an Arabic numeral: 5, 10, 20, etc. But there is no numeral on any US coin, including the quarter! (The wording says “Quarter Dollar.”) A nickel has no “5” on it, and the words “Five Cents” are so tiny, you need a magnifying glass to read them. Look at a US dime. The words say “One Dime,” not “Ten Cents.” You won’t find the numeral “10” anywhere on a dime. Foreigners find these things odd and confusing, as they should.
  • Euro banknotes: Similar to the coins, euro bills come in 5, 10, 20, 50, 100, 200, and 500 denominations.
  • The amount shown on a price tag in Germany is what you pay. The 19% sales tax (VAT) is already included. (Groceries, books, newspapers, flowers, and public transport tickets have a reduced VAT rate of 7%.) Your receipt shows how much of the total you paid went to taxes.
  • Only 32% of Germans have a credit card, compared to 53% of Americans.
  • Credit card transactions per year: Germans: 39. Brits: 167. Swedes: 230. Germans use their credit cards mostly for travel outside of Germany.
  • One reason Germans shun plastic: A German credit card is not really a credit card in the same way that a US credit card works. Payment for charges is automatically withdrawn each month from the cardholder’s bank account. Most Germans only use a Visa or Mastercard for travel outside of Germany. The “credit limit” is the amount the cardholder has in their bank account.
  • Many businesses in Germany don’t accept credit cards because of the fees. Credit card providers get at least two or three percent of each transaction, taking a bite out of a firm’s profit margins. For this reason, many German shops set a minimum amount (10 or 15 euros) for credit card purchases.
  • Savings: Germans today save 11 percent on average, but that’s still much higher than under 6 percent in the US or the 6.5 percent rate in Japan.
  • Ikea (pronounced ee-kay-uh in German) now has almost 50 stores in Germany. Only two of them take plastic – and both are near the border with France where credit card use is more common. Ikea adapts to local customs. In the US, according to Ikea’s online FAQ, “Ikea stores accept: Visa, Mastercard, American Express, Discover, debit cards, Ikea Gift Cards, as well as cash. Ikea Home Shopping accepts all the same credit cards and Ikea Gift Cards as well. Most Ikea stores do not accept personal checks.”
  • Online shopping has led to more use of credit cards in Germany, particularly at Amazon.de. But using an EC (debit) card is still more popular.

*According to a Federal Reserve report on how consumers paid for things in seven countries. (in Quartz, 2014 data)

How to Cope with the Need for Cash

Maestro Card Plus

Although the logo looks similar to MasterCard, don’t mistake the Maestro debit card for a credit card. PHOTO: Maestro/Mastercard

HOTELS and the
TOURIST CIRCUIT

Hotels and most shops and restaurants that cater to tourists in Germany will almost always accept Visa, MasterCard, and American Express cards. But local “mom-and-pop” retailers or restaurants, even in large cities, often do not. Ask in advance, or look for a credit card logo on the door, but don’t be fooled by the Maestro (EC card) logo that looks similar to MasterCard. (See the photo on the left.) Maestro is a European debit card attached to a German or European bank account.

ATMs
Because credit cards are not as widely accepted in Germany as in most other countries, tourists and expats may find themselves using ATMs more frequently for euro cash withdrawals using a US or home-country bank card. The good news: ATMs (automated teller machines, Geldautomaten in German) are everywhere, even inside many stores. The bad news: There may be bank fees and/or foreign exchange fees imposed by the card issuer. To keep these to a minimum, it is best to make fewer withdrawals for more money rather than many smaller withdrawals. Before you leave for Europe you should determine which ATM network works with your bank card, and which will be cheapest to use. (Cirrus/MasterCard and Plus/Visa are the most common.) Your bank may also add a fee for using an ATM that isn’t theirs. Most ATMs will display the fees on-screen before you complete your transaction. Pay attention to that. Learn which ATMs give you the best deal.

Banks and card issuers set a daily limit on how much cash you can obtain with your bank or credit card. You need to know what your daily limit is. Avoid using a credit card for cash withdrawals. That can get expensive.

TAXIS
In Scandinavia it’s very easy to pay for a cab with your credit card. Every cab driver has a wireless card reader (for chip cards), and you can add a tip to your card if you want. In Germany, in theory, you can pay for a taxi ride with a credit card, but the last time I tried that in Berlin, the driver reluctantly tried to process my card, but I ended up paying cash. Always carry some cash backup in Germany!

HF

Also see:
ATMs in Germany: Chips versus Magstripes
Banks and Money in Germany
German Banking and Credit Cards for Beginners

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  1. Pingback: RIP €500 Note | Carl Menger Center for the Study of Money and Banking

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