The Quirks of Israeli Banking
Getting one's head around the banking system in Israel is no easy feat. Indeed, banking in Israel is so utterly quirky, that one blog will not cover it all, so I am splitting it up in to (at least) two parts.
Knowledge of these quirks is important, and will give you the confidence and ability that you need in order to understand the not-always-comprehensible explanations that your banker will attempt to give you. After reading this blog, your Israeli banker will actually be correct in assuming that you already know what he/she is trying to tell you!
So, in no particular order:
As opposed to many foreign banks, there are several banks in Israel that operate an 'all-in-one' account. That is to say, all of your activities in the bank go through one main account, with one account number, including current/checking account activities, investment portfolios, loans (excluding mortgages), foreign currency, etc. This can be confusing when you are having various different currencies transferred in to your account, as the banker on the other side will not understand why he/she was given only one IBAN number for different currencies, however this feature is actually one of the great things about Israeli banking. Anyone who has had accounts in various currencies in an overseas bank will appreciate the benefit of the all-in-one account.
Is it a credit card or is it a debit card?
Well, it’s actually both. It’s a Credit card in that you pay for your monthly purchases in one go on a given day of each month. It’s a Debit card in that when you withdraw cash, your account is debited on the spot. Also, when you use your card overseas and you pay for these overseas purchases in USD or EUR (the only two foreign currencies that the card providers can debit in), your account is debited within a couple of days of the purchase, and not on the regular day of the month that your Shekel spending comes out of your account.
Other ways that the standard Israeli Credit card differs from the cards you know and love from overseas are that your card must be linked to a specific bank account from which the amount you spend is debited, and generally customers pay off the entire monthly bill in one go.
There is a “pure” debit card that was introduced in to the banking system 2-3 years ago – called the “Direct card” – but this is quite a limited card. Speak to your banker for full details.
Fees, fees and more fees
Banks in Israel love fees. They thrive on them. With much less investment banking revenue in comparison to their foreign counterparts (amongst other factors), the local retail banks make much of their income from traditional fees, including for seemingly mundane transactional banking. This is a sore point for your regular hardened Israeli customer, let alone someone who has grown up banking overseas. For us, things like a monthly charge for simply having a current account, fees for ordering a new chequebook, or, my personal favourite, a fee for each line that is printed on your bank statement, are enough to make a person lose their marbles. Luckily for the banks (and potentially for the sanity of customers) most people are not able to keep track of what they are paying in fees, and simply begrudgingly write them off as part of their regular expenditure. The Central Bank has been taking steps in recent years to lower fees and make them more transparent, however there is still a long way to go. So check your bank account for fees and negotiate them down – you have been warned!
Whilst a US passport or Green Card was once more sought after than a hover board that doesn’t spontaneously combust, for a few years now this has not been the case, at least from a foreign banking point of view. There is indeed much confusion as to what Americans can and cannot do in Israeli banks. Acronyms like “FATCA”, “SEC” and others are constantly being bandied about when an American citizen sets foot inside a bank. In order to keep this short, I will get straight to the bottom line. All American citizens, whether they live in the US or outside the US, need to sign the relevant US tax forms in order to maintain a bank account. Contrary to popular belief, all Israeli banks should allow Americans to open a regular bank account. US citizens who live outside the US can even make financial investments (although they might want to check with a US accountant as to how wise it is to invest in certain things, like Israeli mutual funds). US citizens who live in the US cannot invest in anything via the banks, and can only hold cash.
Stay tuned for Part 2….