Bank charges in Luxembourg: how to reduce them easily

You're wondering Which bank charges the least in Luxembourg? Or perhaps you'd like to know the difference between bank charges in Luxembourg and abroad? Then you've come to the right place!

In this article, we take a look at the costs in Luxembourg and give you some tips on how to reduce them easily.

Charges on current transactions

Luxembourg's banking system can have a few peculiarities that may come as a surprise to people from other countries. That's why it's very important to understand compare banks before deciding to open a current account in the Grand Duchy.

Here is a an overview of the bank charges you may have to pay if you open an account in Luxembourg.

Account management fees

These charges are common to all countries. This is a subscription that you pay each month for your bank account.

In Luxembourg, these fees vary between €3 (with a classic debit card) and around €10 a month. A Classic or Premier bank card will usually be included in your banking package. Please note: some banks offer these cards as optional extras.

Some online bank accounts are free 100%However, most of the time, they will simply offer a VPay card, which does not allow you to make purchases on the Internet. To have a credit card enabling you to carry out these operations, you will have to pay additional fees.

Card fees (VISA, Mastercard)

A bank card allows you to pay in shops and on the Internet, and to withdraw cash. It also offers you a whole range of insurance policies to cover your purchases and travel. This insurance depends on the level (and therefore the price) of your card: you may have a Basic, Classic, Premier, Gold or Platinum card.

Some banks offer the card as an optional extra, and charge it separately from your account-keeping fees. Other banks include the card in their monthly fee. Some even offer several cards in their banking pack: you can have 1 debit card and 1 credit card, for example.

If you are looking for a bank in Luxembourg, this is a point to bear in mind. Remember to include the cost of the bank card in your comparisons bank accounts.

Charges for withdrawals from other ATMs

This practice is unique to Luxembourg: most banks charge a fee if you withdraw money from another bank's ATM. These charges can range from from €1 to €2 per withdrawal.

On the other hand, withdrawals from your bank's cash dispensers will be completely free of charge. If one day you need banknotes, plan to go through your bank to avoid unnecessary charges!

Good to know: some banks include a monthly number of free withdrawals from third-party ATMs. So if you are in need (abroad, for example), you can make 1 or 2 free withdrawals a month. Check the price brochure of the bank of your choice for these conditions.

Charges for transfers to accounts at other banks

This is a special feature of Luxembourg. In France, for example, you can make unlimited SEPA transfers, regardless of the bank of the person you are sending money to.

In Luxembourg, some banks require you to pay charges for each transfer made to an account at another bank. These charges are generally between €0.50 and €1 per transfer.

This is an important point to bear in mind, especially if you live across the border and have to make regular transfers to your French, Belgian or German bank. However, banks include a number of external transfers free of charge each month.

Overdraft charges

Le bank overdraft is triggered when your account balance goes into negative territory. The bank then automatically extends credit to you. And you are obliged to repay these sums.

In the case of a bank overdraft, the banks charge you two types of fee: overdraft commission and interest on the amount owed.

Overdraft commissions

This is an amount charged each time your account goes into the red, regardless of the amount of the overdraft. It is a sort of penalty triggered to make you pay for the fact that you have just opened a credit line with the bank. There are two methods of charging overdraft commission:

1. The lump sum : Some banks charge a one-off fee (e.g. €50) when you go overdrawn. This fee may seem unfair, as you will have to pay €50 even if you are only €1 or €2 overdrawn.
2. The percentage of the amount due : By way of commission, some banks charge a percentage of the amount overdrawn. This is generally 1% of the overdraft.

Not all banks charge overdraft commission. Some charge interest only. Be sure to check this point by consulting your bank's price brochure.

Overdraft interest

Interest rates can be scary: you can imagine having to pay hundreds of euros to your bank as soon as you go overdrawn. But don't worry, overdraft charges are generally limited. The charges are calculated by taking the amount of the overdraft and the number of days you are overdrawn. This is then divided by the number of days in the year.

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Here's the formula for calculating your overdraft interest (or agios):

Overdraft interest = (Amount of overdraft x Number of days overdrawn x Overdraft interest rate) / Number of days in the year

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If you were overdrawn by €100 for 15 days, at a rate of 9%, you would have to pay only €0.36 charge.

Overdraft charges can become significant if your overdraft is very large (several thousand euros) and lasts for a long time (several months). But in most cases, you'll pay very little.

In Luxembourg, overdraft interest is generally between 7% and 9%depending on the bank. However, these rates may increase if you exceed your authorised overdraft amount. To find out more, refer to your bank's rates brochure.

Pay fewer bank charges in Luxembourg

Are you paying too many bank charges and want to cut them easily? Here are all the levers you can use to reduce your bank charges quickly:

1. Account management fees : you can easily reduce these charges. Look for a bank that offers a lower monthly fee: some accounts cost only €3 to €4 per month and include a credit card. This can be a good solution if you're looking to cut costs quickly.
2. Bank card charges : Some banks charge 20 to €60 extra per year for a payment card. Make sure you choose an account that includes a good card (VISA Classic, VISA Premier or Mastercard Gold) in your monthly subscription. Card prices are fairly similar from one bank to another.
3. External withdrawal charges : If you often withdraw money abroad, opt for an account that offers a certain number of free withdrawals from third-party cash dispensers. This will save you around ten euros every month.
4. External transfer charges If you often make transfers to accounts at other banks (to your spouse's account, to your family's account, or to your cross-border account), then look for a bank that offers a decent volume of external transfers free of charge.
5. Overdraft commissions : Are you used to being overdrawn from time to time? Then you can save money by changing bank. Some banks charge a fixed fee of €50 as soon as you go overdrawn (even for an overdraft of just a few euros!). The good news is that some Luxembourg banks don't charge any overdraft commission.
6. Overdraft interest Some Luxembourg banks have fairly high overdraft rates (up to 9% interest rate!). By taking care to choose the bank with the lowest rates (around 7%), you can save on your overdraft charges.

To sum up: be vigilant in every area where you can make savings. Scrupulously analyse each bank's charges (withdrawals, transfers, overdrafts), and you'll be able to make big savings.

To find the bank with the cheapest charges, we recommend that you compare banks in Luxembourg. You'll easily know which one to choose.

Take advantage of tax deductions on certain banking products

In Luxembourg, you can take advantage of a wide range of banking products for lower your tax quickly. Here are some of them:

• The home savings plan : This is a very interesting type of saving if you want to reduce your tax and are considering buying a flat or house in Luxembourg. Each year, you can deduct up to €1,344 from your tax. And after 3 years' savings, you can apply for a government guarantee for your home loan.
• The pension plan : you can open a savings account for your retirement, and deduct up to €1,500 each year of your tax. This amount is increased to almost €3,200 for the over-55s. The only condition is that you keep your account active until you are 60. All you have to do is keep it open: you don't have to keep paying money into it every month. However, if you decide to close it before your 60th birthday, you will have to pay back what you have received in tax refunds.
• A car loan or consumer credit: you can deduct the interest charges from your tax return (up to a maximum of ceiling of €672 per year). So, by choosing a loan at an attractive rateThis will significantly reduce the cost of your loan. Please note, however, that these deductions can be combined with those for third-party liability under car and home insurance policies, and must not exceed the annual ceiling of €672 for a single person.

The cheapest bank in Luxembourg

There are two types of cheap banks in Luxembourg:

1. 100% online accounts: Most of them are completely free. However, you will only have a VPay card (you will have to pay extra for a credit card). And in most cases, you won't be able to overdraw.
2. The cheapest classic accounts: with account management fees of between €3 and €5 a month, a payment card included, no overdraft commission, and a few free external withdrawals and transfers each month.

You can find the best bank at the moment by consulting this our selection of the best bank accounts Luxembourg.

If you've already found the ideal bank account for you, here it is how to change bank in Luxembourg.