Your salary interests banks!

Both in Luxembourg and abroad, banks are urging customers who have not yet done so to have their salaries domiciled there, even if it means granting them certain advantages in return. Why this insistence, and what’s in it for you? myLIFE has investigated for you.*

While the majority of customers never really ask themselves the question of where to direct their salaries, banks are beginning to be more and more insistent on this issue. Even if you’re a “multi-banked” customer, you’ve done so with your main bank and, unless you’ve taken out a mortgage with another institution, you’ve probably never considered changing that. That’s not a problem, provided it’s not a default choice! In fact, a salary domiciliation is a powerful act that has a significant impact on the quality of your relationship with your bank.

Salary domiciliation allows for a better identification of the client’s financial habits and specific needs.

What interest for your bank?

For a financial institution, the direct deposit of its clients’ salaries is a major issue. And for good reason, a salary domiciliation offers numerous advantages for your bank. For example:

• • increased deposit stability thanks to a regular financial flow that feeds the bank’s liquidity. Being able to rely on recurring income, the bank is able to better manage its assets and better plan its investments.
  • a reduction in credit risk. A salary domiciliation allows for a better monthly assessment of clients’ creditworthiness. Although salary is not the only factor to consider, this view enables the bank to better manage the risks associated with granting potential credits or increasing a card limit.
  • a better relationship with the client. Salary domiciliation allows for a better identification of the client’s financial habits and specific needs. Based on this, the bank is able to offer products and services more suited to their situation. This is why, if you choose to domicile your salary in a new institution, it will often take the opportunity to offer you an appointment to review your situation and discuss your life plans.
  • increased loyalty. Since the follow-up is generally better, this in turn increases client satisfaction and loyalty, who will naturally prioritize this bank for future requests.

What interest for you?

Here, it is necessary to distinguish between the generic advantages of having your salary domiciled in a bank and the specific advantages offered by a particular institution. Let’s start with the generic advantages. Even though it is increasingly rare (not least for reasons of anti-money laundering), it is possible to be paid a salary or remuneration in cash. If applicable, there are some strong arguments for seriously considering having your salary domiciled in the financial institution of your choice.

• • Enhanced security for increased serenity. Salary domiciliation avoids having to carry and store large amounts of cash yourself, reducing the risk of loss or theft. Thanks to remote banking solutions, the money deposited in your account is safe, available at any time and wherever you are.
  • Simplified financial management. Having a regular income in your bank account allows you to plan automatic payments and standing orders. This greatly facilitates the management of your bills and any loans, while also avoiding penalties associated with late payments.

A salary domiciliation can sometimes allow you to benefit from reduced banking fees or slightly more competitive interest rates on credit.

If, like the vast majority of employees, it seems obvious to you to have your salary domiciled in a bank, the question that remains is which one to choose or for which one to change. Each institution has its own philosophy, but the potential advantages offered are of various kinds:

• • Benefit from a welcome offer. Some institutions offer temporary favorable conditions to their new clients, such as free account maintenance for a year or waived processing fees on the granting of a loan.
  • Access banking solutions under advantageous conditions. A salary domiciliation can sometimes allow you to benefit from reduced banking fees or slightly more competitive interest rates on credit. The bank may also be more flexible with the authorized limits on your credit cards.
  • Enjoy easier access to credit. While your bank may require an assignment of income as a guarantee for granting a loan, it cannot require a salary domiciliation in all cases. However, it is evident that domiciliation will facilitate the approval of the file by its credit committee. Additionally, as the bank has better visibility on your financial means, it could potentially be more generous with the maximum amount of your credit.
  • Rely on the expertise of a local advisor. A salary domiciliation can give you access to a dedicated local advisor if the significance of your income warrants more in-depth financial monitoring.

Is it necessary to domicile your salary in Luxembourg?

The question of salary domiciliation inevitably arises for the many expatriates and cross-border workers who work in the Grand Duchy of Luxembourg. Are there good reasons to favor an institution located on national territory? Absolutely!

First of all, Luxembourg’s financial center is renowned for its strict regulatory framework and stability. This means a high level of security for your deposits. Moreover, many institutions offer you the possibility to open accounts in different currencies in addition to your main account in euros. A real advantage for certain categories of expats and investors working with foreign currencies. Having an account in one of the major banks also allows you to benefit from certain local payment facilities like Payconiq.

For the wealthiest, Luxembourg also offers premium banking services (discretionary management, advisory contracts, wealth management…) as well as unique investment vehicles. Being able to rely on the in-depth expertise of local advisors is also a valuable asset.

A local universal bank can support you simultaneously in managing your private and professional finances.

Are you an entrepreneur in Luxembourg? Why not choose a local universal bank that can support you simultaneously in managing your private and professional finances?

Ultimately, the decision regarding salary domiciliation is yours, but make sure you make it with full awareness.

* Content translated from French by the BIL GPT AI tool