Switch bank thanks to banking mobility

Are you thinking about switching bank? It is not as complicated as it seems. Banking mobility has simplified the process. How can you go about this and what are the best practices to be adopted? myLIFE offers some tips to help you during your account transition.

What is banking mobility?

As a client, you are free to transfer all or part of your money from one bank to another. This can be useful if you want to get the most preferential rates, additional services or if you wish to enter into or renegotiate a loan.

Banking mobility is a service governed under the Law of 13 June 2017 which consists in facilitating the procedure around transferring current accounts between Luxembourgish banks. Your new bank may therefore, at your request, take charge of all the necessary steps on your behalf, including collecting data from your old bank, transferring funds, sending new bank details to various bodies, closing your old account, etc.

NB: this service relates only to the transfer of individuals’ current accounts, and not savings accounts, investment products or loans.

What steps are involved in changing bank¹?

1. Study the market

Before doing anything else, take the time to compare different banks’ offers. Generally, all Luxembourg banks offer current accounts with basic services including one or more bank cards, SEPA transfers, etc. However, there are some differences, such as the types of services on offer, the account handling charge amount, interest rates, targeted offers, etc.

A bank that is 100% online cannot provide the same level of advice and support as a traditional institution.

To help you with your choice, the Luxembourg Financial Supervisory Authority (Commission de Surveillance du Secteur Financier – CSSF) has set up a comparison of the fees charged by the country’s main banks for the most representative services linked to a payment account.

NB: Many different types of bank exist today (traditional, online, neobanks). Be sure you choose the one best suited to your current and future needs. A bank that is 100% online cannot provide the same level of advice and support as a traditional institution.

2. Open a new account

Once you have found your new bank and the package that suits you best, get in touch (online or in branch) with an adviser to start the onboarding procedure. With some banks, this can be done entirely online.

Several supporting documents must be provided. This is a legal obligation for the bank, which must comply with customer verification rules (KYC: Know your customer) as part of the fight against money laundering and terrorist financing.

The documents may vary depending on your situation and the financial institution in question, but at minimum you will be asked to provide:

• • an identity document;
  • proof of residence;
  • a document proving your employment status (a copy of your job contract, payslips, pension certificate, etc.);
  • proof of the source of the funds (inheritance, sale of property, etc.), where applicable;
  • a tax identification number (TIN), also known as a tax number or tax reference number;
  • etc.

To validate this onboarding, you will need to sign some documents (account opening, general terms and conditions, service agreement, etc.). Take the time to read these carefully.

Useful info: If you live abroad, any bank accounts open in Luxembourg must be declared to the tax authorities in your country of residence. This is a legal requirement particularly for German, Belgian and French residents.

3. Start the account switch procedure

Once your new bank account is open, you can choose to transfer all or part of your standing orders and/or direct debits from your old bank to your new one. You can either delegate this task to your new bank using the banking mobility service, or do it yourself.

Banking mobility has simplified the account switching process. You can ask your new relationship manager to act as an intermediary.

> Delegate the procedure for switching your account to your new bank

Banking mobility has simplified the account switching process. You can ask someone at your new institution to act as an intermediary. All you have to do is fill in and sign an account switch authorisation.

In this document, you can choose the tasks you wish to entrust to the old and new banks, such as: drawing up a list of standing orders, direct debits and transfers; notifying payers and creditors of your new bank details, cancelling recurring direct debits and transfers from your old bank account; transferring regular transactions (automatic salary payments, direct debits and transfers); moving the balance to the new account; closing the old account, etc.

NB: it is your responsibility to update your bank card number yourself on the websites where you have registered it (streaming platforms, online sales sites, etc.).

Before leaving your bank, remember to save your bank statements. It is important to archive and retain them.

Avoid closing your old current account too quickly. Check that all transactions have been updated (…).

> Take care of the account switch procedure yourself

If you decide to take charge of transferring your current account, the process is a little more complicated, as you will need to make sure you do not forget any of the steps involved. The advantage is that it can be done very quickly. Here’s how to go about it.

• • Send your new bank details:
    • To your payers: employer, pension fund, employment administration or any other person or body that pays you recurring income (tenant, social security fund, children’s fund, tax authorities, etc.).
    • To your payees: all companies and administrations that operate periodic direct debits (telephone and internet operators, electricity suppliers, insurance companies, nurseries, gyms, etc.).
  • Ask your old bank to block your direct debits and standing orders. Give your bank a specific date, taking into account the time that the organisations will need to update your bank details. Remember to leave sufficient funds in your old account to cover final payments.
  • Tell your new bank that it can set up your standing orders on the new account.
  • Request the transfer of the remaining balance from your old bank to the new one. Make sure that no more charges are debited from your account (payment by deferred debit card, for example) before transferring your money.
  • Close your old account. Avoid closing your old current account too quickly. Check that all transactions have been updated and that no more withdrawals, refunds or payments are being made. The various organisations may take some time to change your bank details.

You can carry out some of these operations yourself (blocking and setting up direct debits and standing orders, transferring the remaining balance) via the online banking.

NB: sometimes it is not possible to close a current account because it is linked to a loan, a safe-deposit box, a term deposit, etc.

Useful info: Generally, closing an account is free, but a fee may be charged if the closed account was created less than 12 months ago.

You can find full details of the procedure for changing your account, as well as sample letters, in “Switching Bank Accounts in Luxembourg: A Guide” published by the Luxembourg Bankers’ Association (ABBL).

Can I transfer my savings accounts and other banking products?

Other banking products (savings accounts, term deposits, etc.) cannot always be transferred, and are not covered by the banking mobility service. Depending on the situation and the specific policy of each bank, you may need to keep your old current account open so that it remains attached to your banking product. The alternative is to close the products held at your old bank and reopen new ones at the new institution.

Check with your banker to find out whether transfers are possible and under what conditions, particularly in terms of charges.

Loans are not transferable and are not covered by banking mobility.

What about real estate loans?

If you want to transfer your bank loans (real estate or consumer credit), the procedures are different. Loans are not transferable and are not covered by banking mobility.

Start by checking the terms of the contract you signed when you took out your loan, to see whether or not it includes any special terms or a direct debit clause2. In all cases, the lending bank can impose its own conditions on an existing loan. If there is a direct debit clause, you are supposed to keep your credit and leave your income with your home bank.

However, you can ask your new bank to buy back your credit (without the new bank being obliged to accept) or, if you have the means, to repay your loan early. In both cases, you should find out what you need to know before making your decision, as these procedures can involve significant costs, depending on your situation.

Now you know more about the formalities involved in switching banks and the advantages of banking mobility. If you’d like to find out more about the onboarding process, read our article: Onboarding: how do you get started with a bank?

¹ These procedures only apply to the transfer of a current account between banks established in Luxembourg.

² The direct debit clause requires borrowers to pay out their income into an account opened at the bank granting the credit, for the entire term of the loan.