Banking in Israel

Banking in Israel can be very different when compared to your current experience. Banking in Israel is less competitive and generally offers consumers less of the free services and advantages offered elsewhere, especially when compared to the USA.

While there are 16 commercial banks listed by the national governing body, Bank of Israel, details on Wikipedia show that the top 5 banks control over 90% of the market, with two largest banks controlling 60% of the market. Wikipedia’s list of banks in Israel shows that the remaining banks are either going out of business, are subsidiaries of one if the top 5 banks in Israel, or are soon to be acquired by one of the big five.

With such a low level of competition, banks have little incentive to offer better service or to reduce fees. In reality, this means that account holders are much more likely to pay for things they get for free from banks in the USA and elsewhere. Banks in Israel typically charge a minimum monthly fee for keeping an account, regardless of the account balance or existence of other accounts. There is generally a charge for every action that results in an activity line on the statement, including transfers between accounts held by the same customer, and even withdrawals of cash from the bank’s automated teller machines (ATM,s), known locally as a Kaspomat. If too few actions resulting in a specific fee are made during a statement cycle, the minimum monthly charge is levied. If there are more transactions, the full amount for all fees is charged.

Bank branches are more individual in Israel, with some services requiring a visit to the specific branch where the account is held. Activities that might easily be accomplished at any branch of a major US bank might only be available at your home branch, so it is best to choose a branch that is convenient in the long run. Some policies may be handled by the local branch, allowing some privileges to clients of that branch that may not be offered at another branch, although this appears to be waning.

Credit card policies are often surprising to newcomers. You will likely be charged a monthly fee for the privilege of having a credit card, and a second fee if your spouse is also issued a card on the same account. The monthly credit limit can be shockingly low when compared to USA standards. This is often the result of having no recent banking history in Israel, and the lack of a mature national credit rating system. Because banks are not permitted to collect debts from a lien against the customer’s primary residence, banks cannot include the value of your primary residence in their calculations. The result is often a very low initial monthly credit card limit. To compound this lower limit, paying the balance in mid-month does not restore available credit. The monthly limit is usually absolute for the month.

Israeli banks and their customers generally live on a monthly schedule, with the 10th of the month being the most important day of the month. Wages are generally paid monthly in Israel, at the start of the month. Bills are generally due by the 10th of the month, and payment of the credit card balance generally follows this pattern. Banks in Israel usually offer one popular service at no charge – overdraft.  Known as minus (pronounced meenoos), accounts have an overdraft limit that is used every month by many Israeli customers. Accounts may not remain in negative territory after the month renews, giving rise to the popular idiom ‘to close the month’ (Hebrew: Lisgor Et HaChodesh). After a month of spending the account balance into the negative, Israelis must deposit enough to bring the account balance above zero. The negative balance has a limit, and failure to restore the balance can lead to some drastic consequences. Banks may offer to keep the account open on condition of the customer taking a loan, possibly leading to a cycle of debt that is best avoided.

Banks offer a lot of services via their websites, mobile phone apps, and automated teller machines. This is a good situation, because banking hours are often fairly irregular, and banking in person can be challenging. Websites can be translated into English as they are used, allowing access for those whose Hebrew is not sufficient for in-person banking. Banks staff, documents, and the systems used to route visitor traffic depend on Hebrew, and can appear confusing to newcomers. Banks in Israel often have different schedules on various days of the week. It is not rare for a bank to be open from 8:30 in the morning until 1pm or 1:30, then to reopen once or twice a week from 4 to 6 pm. It is always wise to check the bank’s schedule, and even to make an appointment, if you need to visit the bank.

Banking with a smartphone is very popular in Israel, with applications allowing transfer from the customer’s account to the accounts of businesses and individuals at other banks. Regular automatic payments are also very popular, with utility bills and other types of monthly payments being authorized for direct transfer. This type of recurring transfer is known as Havarat Keva, and is very popular. Making appointments, communicating with bank staff, and other activities are often easily accomplished on the phone app or the bank’s website.

Foreign banks often offer relatively more in the way of free or lower-cost services than banks in Israel. Those with strong banking relationships in the USA or elsewhere might be wise to continue those relationships while visiting or living in Israel. Residents of Israel working for overseas companies and being paid in foreign currency might keep the bulk of their banking activity with their native banks. A good credit card plan that doesn’t penalize foreign transactions can go a long way to spending foreign currency in Israel without much difficulty, and help avoid the need to transfer funds between countries. Israeli utility companies and other businesses may not be able to accept a foreign credit card for automatic monthly payments, but a foreign card can often be used every month if the details are entered manually. This allows rewards to be accrued by the cardholder (virtually unheard of in Israel), while offering a reasonable currency exchange rate.

In summary: Look for a branch that is convenient when opening an account. Get used to the website and phone apps. Pay attention to the monthly limits on credit cards and bank accounts. Compare the cost and convenience of banking in Israel and your home country. Be prepared for less pleasant customer service and fee structures. Hope for future improvements with the predicted influx of new Olim from English-speaking countries.

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