Schuster said that if the Madrid giants could have met Ballack's Chelsea salary, the Germany captain would have been their player.
"Ballack has an excellent contract with Chelsea that would bust Real's salary structure," the Madrid coach told German magazine Kicker.
"No player here is in that range and we didn't want to go there."
Ballack has been out of the Chelsea side since April with an injury and has been dropped from their Champions League squad, prompting rumours of a Stamford Bridge exit.
"The door for Michael is not closed," he said. "He has his soccer qualities and they will be there in six months as well. But it would be a financial story."