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Banking

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Contents:
Overview
Checking Account
Credit Cards
Bank Loans
Investments
Relevant Links

Overview

Israel has a modern banking system.  Checking account, credit cards, ATM machines, bank by phone, bank by Internet, auto-deposit and auto-withdrawal, it's all available here.

Of course, there's a "but".  But, no banking procedure in Israel operates the same or even similar to banking in the U.S.  In banking, it's the little details that count and can often get you in trouble, so read carefully...

One special point about Israeli banking.  Israeli banks have many rather strict rules in place about everything, from opening a checking account, gaining check-writing privileges, receiving a credit card, getting a loan and just about everything else a bank does.  However, the managers in Israeli banks have tremendous flexibility in waving these rules.  By building a relationship with and working with a bank manager the banking experience can become much smoother.  Of course, as a new immigrant you probably won't know one.  This is an unavoidable problem (however, when you encounter a rule you don't like, go right in and meet the manager and talk it over).

A brief note on bringing your investments (stocks, IRA, CD's, 401k, etc.) to Israel (assuming you have any).   There is no requirement for you to bring your money to Israel (there used to be a couple of years ago, no longer).  Before you considering bringing such items (or any serious sum of money to Israel) come and review the local investment options carefully.  My experience for monetary investments is that you will do better in the U.S.  A little more detailed discussion will be included below.  You can deposit U.S. checks in Israel, so bringing money later is as simple as writing a check (of course there will be a currency exchange charge and a waiting period).

Checking Account

So you want to open a checking account.  First lets cover how an Israeli checking account works then what it will take to open one.

Checking Account Rules 

Writing Checks: You can write checks just like in the U.S.

Post-Dated Checks: Checks can be post-dated up to 1 year ahead.  (It is common practice to make large purchases using post-dated checks [say 1 per month for 6 months] and/or pre-pay certain services as well [example: building condo-fees are usually paid with 12 post-dated checks at the beginning of the year]).  Writing post-dated checks is the norm of Israeli society.

Negative Account Balance: An account can run a negative balance (essentially a line-of-credit on the account), subject to pre-approval by the bank.  The bank will usually approve a negative balance up to the amount of your monthly paycheck, subject to the paycheck being auto-deposited into the account (which is the norm.)  Naturally a negative balance is charged high interest (like 20%).  Most Israelis use this facility regularly (like credit card balances are used in the U.S.)  With this line-of-credit a check won't bounce until the account exceeds the specified negative amount.  Note the managers have flexibility in setting or limiting this amount.

Depositing Post-Dated Checks:  What???  In your Israeli bank account you may deposit post-dated checks.  The bank hold the checks, which can serve as collateral against a larger line-of-credit/negative balance.  When the check comes due, the bank will auto-deposit it and credit your account.   Of course, if the check later bounces the amount will be withdrawn.  This explains how a business can accept a series of post-dated checks and still have a cash flow (being that the bank will increase their available line-of-credit with the post-dated checks serving as collateral). 

Bouncing Checks: Bouncing more than 10 checks in 1 month places the account and all future banking privileges in Israel at any bank under suspension for 1 year.  Doing this 3 times in a 1 year period causes loss of banking privileges for 5 years.  (Yes, that's right, you won't be able to bank, at all, for 5 years, period.)

Stopping a Check: A check can be stopped just like in the U.S.  However, the way that banks process checks is this: first they check if the account has the amount to cover it then they check if it's stopped.  Meaning even if you stop a check you must have the money in the account (or negative-balance allowance) to cover it or it will bounce.  (That's right, a stopped check can bounce.)

Automatic Withdrawals/Payments: You can authorize companies to make automatic withdrawals from your account (such as the phone company or your children's school).  Certain companies only accept payment this way.  Be warned of 2 problems- one the withdrawal occurs before you receive the bill so you don't know the amount of the withdrawal before it occurs (if it's something like a phone bill which is not the same every month), two sometimes the companies make mistakes and take out too much or take twice, resulting in you having less money in your account than you think (which can then result in bounced checks).  Note that if you catch such a problem within 3 days the bank can reverse the withdrawal.

Fees: Monthly maintenance fee, checkbook charge, per-check-charge, interest charge (if you use your line-of-credit), banking services charge (if you do anything with a teller), ATM card charge, etc.  You'll be nickel-and-dimed to death and expected to say thanks afterwards.  Don't be surprised, there is no way to avoid it (though some banks are more expensive than others).  Net result is NIS 15-80 per month in account charges for the average customer.  That's just for the account, a credit card will cost from 200-500 NIS per year, an ATM card another 80 NIS.

Opening a New Account 

You are ready to open your account.  You walk into the bank of your choice and ask to open an account.  Just bring your Israeli national ID card (teudat zehut) and 50 shekels and you have an account.  But...

If your a new immigrant it may take a few weeks or even months to get your Israeli ID card.  On arrival (or on change of status) you get an immigration ID (teudat oleh), but that won't work for a bank.

Many banks won't give immediate check writing privileges to a new immigrant.  For that matter many banks won't give immediate check writing privileges to any new account.

In both cases the problem can be overcome only by dealing with a bank manager.  

In the first case the ID number on the immigration ID is the same as will be put on the national ID card, so a manager can use the number to assign to your account and mark the number verification as pending until you receive your official national ID.

In the second case it takes either money or the starting of a salary auto-deposit.  For the money option either a large money deposit to the account or placing the money in the equivalent of an Israeli CD (this is called "closing" a deposit in Israel in the account and works exactly like a U.S. certificate of deposit [CD]).  This gives the bank security that they won't have to deal with a pile of bad checks.  In my specific case I "closed" $1,000 for 3 months.  It may be possible to avoid this with either smooth talking to a manager or having a friend with an excellent relationship to the manager or getting someone to act as a guarantor for you.

Credit Cards

Israel has Visa and Mastercard/Yisracard.  There are two versions, "regular" which can be used inside of Israel only and only charges in shekels and "gold" which can be used worldwide in any currency.

Credit Cards are issued by banks with the bank usually carrying a relationship with either Visa or Mastercard (not both).  So whether you get a Visa or Mastercard depends on which your bank uses.

Getting a Credit Card

You just arrived in Israel.  You have no credit history here.  You have no job history here.  You have no large sum of money in the bank (if you do actually have a large sum of money, my advice is not to bring it).  So how can you get a credit card?

A bank will only consider issuing a credit card if you either have at least 3 months of job history (that is, 3 months of paycheck auto-deposit into your checking account) or some amount of money "closed" in the account (say at least NIS 5,000 or $1,000).  If you have one, both, or some combination of these you can request a credit card.  If you are rejected go to the manager and plead your case and trustworthiness.  (Worked for me, twice!)  

Credit Card Use & Rules

The full balance on the credit card will be automatically withdrawn from your checking account on the 1st, 2nd or 3rd of every month to pay it.  You have no choice in this.

You will receive a statement on your credit card somewhere between the 10th and 20th of the month.

This means you won't know how much money is being taken out of your account unless you keep careful track of your charges or check your account balance on the 3rd.

Some services will auto-charge your card on the 1st of every month.  If the amount is not fixed (such as for a cellular phone air time) you really won't know how much has come out of your account.  There is no solution for this problem.  (Exception, some banks are now offering bank-by-Internet [but it's not free], in this case you can view your charges and statement at any time, check on the 2nd and you'll know.)

So, from the above you should note that there is no carrying a balance on your credit card.  

When charging a large purchase (over NIS 200) some establishments will offer multiple payments without interest.  What this means is that the charge will be divided across multiple months and carry no interest charge.  (Example, you spend NIS 1000 at the grocery store and charge it, they will offer you 4 payments, meaning you can choose from 1-4 months [at the time of the charge] to divide the total charge.  Result, you pay NIS 250 for 4 months on your credit card for this charge.)  This is a wonderful idea but can make charge tracking very confusing.  Normally this option is available for 3 payments, sometimes 4 for larger amounts.  (Once I was offered 6, the most I have seen.)  Occasionally an establishment will offer payments with interest (up to 12).  As in the U.S. this will be at loan-shark rates (up to 20%). 

Your credit card will also function as an ATM card at the bank ATM.

You are responsible for charges on your card if it is lost or stolen until you report it as such.

The bank will charge you somewhere around NIS 250 per year for a regular card and NIS 500 per year for a gold card.  No fee free cards in Israel.

Extra cards are not normally issued.  Meaning you get 1 card for you and your spouse, not 2.  If the bank does issue an extra it won't be the same number (meaning you get 2 separate bills).  Check with your bank to learn their policy.

As noted from above, credit cards are tied to a checking account.  If there are problems with the account (such as bounced checks) the card may be automatically canceled.

Bank Loans

As a bank loan officer at Bank Leumi recently explained to me, Israel has no credit history system.  This means that when you go asking for a loan the bank has no way to know if you are a risk or not.  Their only protection against the risk is collateral, guarantors or past loan history with that particular bank.  

Collateral: A late-model paid-off car.  A house (in Israel) with equity.  A large sum of money in the bank (in the bank from which you are requesting the loan) secured against withdrawal ("closed").

Guarantors: People who are willing to sign a paper saying that they accept full responsibility for paying your loan should you fail to do so.  Their bank must certify they are in good standing and they must prove income or collateral of their own.  1 to 4 required depending on the loan amount/type (car, house).

This puts most new immigrants in a catch-22.  No collateral since they haven't bought a car or house yet, can't buy a car or house without collateral.  New to the country so they don't have friends/family willing to act as guarantors (they better be pretty good friends).

There is no easy solution to this problem.  Occasionally an employer will be willing to act as a guarantor.

Loan Limits: Israeli banks will not make 100% loans on anything, or even 90%.  The normal car loan is 60%, though 80% can sometimes be found.  Home loan maximum is ~70%.  This is another way the bank limits its risk as they will hold title on the purchase as well (car or house).

Interest Rate: Loans in Israel are offered at prime rate (according to the Bank of Israel) plus.  An average rate on a car loan would be prime+3%.  (A really good rate is prime+1.5%).  As of July 19, 1999 the prime rate was 13%.

For a full example of getting a home loan in Israel, click here.

Investments

Bank interest on CD's ("closed money") is usually quite good.  For significant sums (NIS 20,000 or more) the banks offer a rate such as prime-rate minus 2 (as of today that would be 11%).

Further, the Israel stock exchange has been doing quite well, in the double-digit gains for this year.

All this might sound good.  But all these investments are in New Israeli Shekels.  The problem is the exchange rate versus the dollar.  Last year (1998) the shekel dropped over 20% against the dollar.  Now, this doesn't happen every year but if your investment gets caught on the down side you could lose all your gains.  (Further, many local services and almost all imported goods are priced in dollars, so when the exchange rate changes the price changes the next day.)

Net advice, learning to receive a decent return on your money with decent safety is not simple (anywhere, not just in Israel).  Keep your investments where they are until you have time to fully understand Israeli investment opportunities.  When you do choose to bring some money in-country, it can be brought as easily as depositing a U.S. check into an Israeli bank account (10 days to clear).

Relevant Links

Bank Mizrahi English Page

Bank Leumi English Page

Bank HaPoalim English Page

For a full example of getting a home loan in Israel, click here.

 


Last Updated: 22-01-2000
Copyright 1999-2001 by Akiva M
E-mail to akivam .a.t. gmail 'd'o't com with questions/comments.