Sunday, April 01, 2012

How To Bank (More) Like An Israeli



There are many surprises (and yes, some horror stories) for former Americans who make aliyah and open a bank account in Israel. For example, in most Israeli banks, you cannot cash a check against your own account. You must bring it to the bank (and some say even to the specific branch) that hosts the account on which the check was drawn in order to cash it. Even further, some checks, marked with two parallel black lines on the face, can't be cashed at all and must be deposited.

Being constantly surprised by banking practices here, I asked friends on Facebook to comment on what they've learned about banking since making aliyah. A very special thanks to all who responded to my request.

I've organized and compiled the comments here in an effort to make things easier for the rest of us. If you have other tips, please feel free to add them in the comments section below. Especially welcome are comments that correct errors, if any, listed below.

First, in no particular order, some basic facts about banking in Israel:
  • Most Israeli credit cards operate more like debit cards. You get a monthly credit limit and your credit limit is reduced as you charge things during the month. Payment is taken from your account once a month and your credit line is restored to the monthly limit. When you first arrive and/or whenever you are making large purchases, your card can be declined even if you have plenty of money in your account. This is generally resolved with a call to your banker who can authorize a monthly credit limit increase, either temporarily or permanently.
  • Tashlumim means payments. When you buy a big-ticket item, you can arrange to make monthly payments, called tashlumim, generally without interest charges. Each time you check out at the grocery store, you will be asked how many payments you want to make. So if you're not careful, you could still be paying in September for vegetables you ate in June.
  • Many recurring bills (utilities, arnona, cell phone, even charitable donations) can be set up to be automatically deducted from your bank account or charged to your credit card. This system is called horat keva.
  • Most banks charge a fee for everything. We once wanted to make a mortgage payment in cash and were shocked to learn that there was a fee to deposit cash into our account.
  • Although less common than it once was, overdraft is a system by which Israeli banks cover your bills and lend you money (with interest) without informing you that you have gone into overdraft. As I understand it, there are now limits imposed on accounts so people can't run up the kind of huge overdrafts they used to, but the system still exists.
  • Israel has a banking system called Bank HaDoar which makes it possible to open an account at the post office and do most basic banking transactions there. Fees and services are bare bones, but there are branches all over the country.

Here are some comments about surprises olim encountered as a result of being unfamiliar with the Israeli banking system. In most cases, these are being published verbatim, but I did edit lightly to correct typos and make things a bit clearer to those less familiar with the system here.

You can write post-dated checks.

You can write a check with the payee blank. Your check will be passed from hand-to-hand as cash until someone decides to deposit it.

Be very careful about cashing checks, because after 5 months they will not honor/deposit the check in your account.

All your 'horao't keva' should be put onto your credit card and not via your account, because they will charge you for every single transaction including hora'ot keva of course. So on a credit card, all your payments are deducted once a month and the fee is charged only once. Very useful, bankers don't tell you this of course.

The problem with putting everything on your credit card is that you will use up all your mesgaerit (the limit on your card). It has happened to us. We bought a few big items, fridge, beds, etc. and put them on payments on our card. When I went to the supermarket the next day, the card was declined. When I called the bank, they said I had reached my limit.

Some expenses, like tuition for school, can't be charged on a credit card and can only be paid by hora'ot keva from your bank account.

Unpaid tashlumim still count against your credit limit, which will lead them to shut down your card. For example, we had two children to pay orthodontia for, so my husband arranged tashlumim through the kupa, using his credit card. The next thing we knew, all of our credit cards attached to the same account were shut down because they decided that we were in overdraft. They were not able to explain this to us when we called to ask why we couldn't use our credit cards, and we started freaking out, thinking someone had stolen our credit card, until I analyzed the account closely over the internet and then called them up arguing. That's when they explained to me that tashlumim, even though you are not paying it yet, still counts against your available balance as if you are paying for it!

The big one for me was overdraft. I was in shock when I realized that we had one. So, they should know that such a thing exists and it is based on your monthly income and does incur interest.
They will bump it and bump it until pitom you have a huge debt on your hands. Happened to us to, we went to the bank and our overdraft was almost at 40,000 shekels!! I was in shock and they said that every month they just bumped it up to keep everything covered instead of telling us to stop spending!! This was before we could access our account on the net. Now, I watch it. But, on the plus side, if you have some kind of financial emergency (broken appliance, emergency trip abroad), you can get a temporary raise in your overdraft or a small loan fairly easy at the bank.

If the bank machine eats your check at a different branch, you have to get your branch to call them and arrange for them to "transfer" the money into your account, since the branch which ate the check takes the money for themselves.

It is sometimes cheaper to take cash from an ATM than from the teller. It pays to ask. 

When your credit card expires, they don't mail a new one to you (or even send a notification). You need to know by yourself to go to the bank and pick it up.

Banks will not mail credit cards, check orders or PINs. You have to pick them up yourself.

And when the card expires without you noticing, your payments could be declined and not paid. This also happened to us when we were in the US on vacation. Our card expired, we weren't here to pick up the new one and activate it. Our phone got turned off because we "missed" a payment even though there was plenty of money in the bank. 

Banks here know no privacy. They will share your bank details as if it were a shuk. Coming from Europe where you need an appointment with the banker to discuss your matters .. here it's quite a shocker!

You can get a credit card from CAL. It is called a "Cal Active." It works like the American credit cards. You can charge the full amount or do payments if the place of business offers it. Each month, the minimum amount is automatically deducted from your bank account. If you want to pay more than the minimum, you need to call or go on-line to raise the amount to be deducted. I got my Cal Active from being in the teacher's union, but I am sure there is other ways of getting it.

When you send a deposit by mail, it can take weeks to show up in your account.
 
Here are some tips olim and vatikim have learned about how to work with banks:


The number one tip: Make friends with someone at the bank. It will prove useful time and time again to know a particular employee you can go to with your banking problems.

I think it's fair to say that banking here is more "human" than in the U.S. - you can talk to your banker or the branch manager if you have issues or special requests to deal with.

Sometimes you can get bank accounts through your place of work. Like, I am a member of the teacher's union, irgun hamorim, I can open an account with Bank Discount with extra benefits and more loan options with better conditions since the organization is the guarantor.

Always make sure you're getting the best deal they can give you. We were with Bank Discount from Day 1, always dealt with the same woman who knows us. Three years into having an account we went in to tell them we want to switch to a different bank for a better rate. She suddenly says, "You're a doctor, right? I think I can get you a great rate." It took her three yrs to decide to share this...and we didn't know enough to ask for it!

Regarding mortgages, my advice is to use a broker. Our first mortgage we did by ourselves and now we are re-financing through a broker. We got a bad deal the first time just because we didn't understand anything. It is well worth the money to go through a broker.

Realize that it's not the bank that makes the polices, but rather the branch itself. Some banks are not olim friendly at all and you have to "prove" your solubility over the course of 1/2 a year to a year, before they will simply let you deposit foreign checks. Other banks, which deal with olim, and realize 1) American salaries are much higher than Israeli ones, 2) American HATE being in the red, will be much more flexible and will even "advance" you the money until the foreign check clears. Also, very important, you must check your bank account balance. In America if you're in arrears, the bank will call you nonstop. Here, not only don't they tell you, they actually don't mind it at all.

I think in my 32 years here, I have had just about every banking problem there is: shutting down checking (after the divorce), bounced checks, miscalculated charges, etc. I have found that there are two big factors in successful banking: 1) get an online account with the bank and monitor your activity often, and KNOW (not guess) what your balance is, and what is going in and coming out. 2) develop a good relationship with the bank personnel. Loans, overdraft, and even all kinds of charges are really on a "sliding scale," despite their being bank guidelines. interest can be adjusted, etc just by showing good faith and being open with the bank folks.

Finally, a number of people wrote about good experiences they have had at banks in Israel. And they name names.

I actually opened an account at Bank of Jerusalem and I love them.

Some of the banks (Bank Yerushalayim) will let you prove your income for a loan by a letter from a Rav. You put together all your income info (especially if it is undocumented) take it to a Rav or the bais din and they certify that the info is correct and the bank accepts it as proof of income. We did that in Kiryat Sefer to prove income for a loan!

Our family started banking at Bank of Jerusalem when we got our first Israeli mortgage close to 10 years ago. After we paid off the mortgage and made aliyah, we were going to switch to a bank closer to home, but we have been getting excellent service from our English-speaking banker at Bank of Jerusalem so we stay there. We recommend him, and the bank, to many new olim who are looking for an olim-friendly bank.

I just had a wonderful surprise. Bank Hapoalim called because my balance was over a certain amount and they want to know if I want to invest it with interest. And when deciding how much to withdraw, she asked me how much I think I need over Pesach :) And of course, the call ended with Chag Sameach!

Our best banking experience has been with Bank Yahav (which is now open to everyone). At least in our case, they don't charge ANY transaction fee (no line fees either). And we cash checks at our bank all the time.

Bank Leumi started mailing the credit cards. I was prepared to go get mine when I received a replacement by mail. To validate it you have to call them or go to an ATM.

I love Bank Hadoar! You can go to any post office and do your transactions. We pay 12 NIS a month for a debit card. No tashlumim. No ovedraft. It is simple and it works. Plus you can get a debit card for international purchases if you want. Post offices have better hours than banks in general.

And one final, upbeat comment from a woman who single-handedly shared the most tips for the benefit of the rest of us:

With all these mishaps we have had at the bank (and we have had a lot), I am very pleased with my financial situation here. I am a teacher and my husband an officer manager. Our salaries are not high at all and I feel with all the things offered here that aren't offered in the States have made it easier to get by here without feeling like you are drowning. I never stress out if I am not going to have quite enough money to cover my debts because of overdraft and post-dating checks and payments. You just have to watch it and manage it so that it doesn't get out of hand.

May we all be blessed to learn from one another always.

14 comments:

Mark from Haifa said...

Having been here 20 years, I have become accustomed to the banks and have much less patience for U.S. banks. However, in reading your post, I want to impart a little extra wisdom from experience.

1. When opening an account, you have to go and not act like an American. The bankers hate it. You have to walk in like you own the bank and always try to have the manager (at the beginning appoint you a personal banker). Try to get his cellphone number as I do. I have had an account over the years with every bank. My last jump was to Hapoalim, and they have the best services if you can get a good banker…. particularly for Israeli and foreign securities trading and wiring foreign currency overseas if you are in need of those services. One native Israeli told me sort of cynically that he has two bank accounts and the banks love to see movement so he electronically sends the same 10000 NIS bouncing back and forth between accounts to show he is a big shot. He claims the banks love it although it sounded rather stupid to me but he builds houses so I assume he has reasonable relations with his banker to stay in business.

2. Your assessment of the credit limit on payments and having cards blocked is quite true. If you can afford it, you should have two cards each for husband and wife. One strategy is to have two card from the bank and negotiate the biggest limit you can get on one. For someone with family living abroad, try to get one at least 40,000 NIS limit preferably more. Next, there are other cards that you can get outside of the bank. For example, Supersol has credit cards through Leumi that are "Choutz Banka-it" (outside of the bank). These cards are paid monthly by Horat Keva (Bank Standing order) to your regular account. CAL has Lufthansa Visa cards (if you can stomach a card from Lufthansa) just to name a few possibilities (there are many other options). Put payments on one card and use the other card for everyday use. The next issue is to get them to waive the monthly fee. Teachers have the best deal in the land. Ashmoret from the Teacher's Union gives Mastercards free from monthly charges which you can also get "Choutz Banka-it" (outside of the bank) if not with Hapoalim based bank. They will allow your spouse to have one, too.

3. Bank Line fees can be reduced by negotiation. I told my banker if I see one, I will close my account. He waives them. But the benefit has a time limit so you have to go into the bank to get it renewed (usually annually). Also negotiate the bank to waive teller fees which are about 5 times higher than electronic fees. In the worst case, negotiate that the teller fees are the same as electronic transaction fees.

Mark from Haifa said...

4. I disagree very much with your assessment of putting all charges on the credit card…..cellphone, telephone, gas, etc. as a means to save a line charge. You have to be very, very careful. If anyone of these companies make an error, you pay. The credit card companies do not work in your favor legally and there is a marked difference legally between customer rights as in the USA vis a vis credit cards. You have to fight and claw to get the credit card companies to reverse any charge here. However, if you pay by bank standing order, you can cancel any debit from your account within up 3-5 days that a suspicious debit is identified. Putting charity payments on a credit card is also very dangerous since the charity can overcharge you and you have no legal recourse. I pay charities ONLY by check and never by credit card unless I know the charity well. It is safer to set up a bank Horat Keva to a charity than a credit card horat keva. I get into many arguments with charities soliciting money on the phone after they request my credit card and CVV number, and I tell them to mail an envelope. It is very dangerous….don't give credit card details except to people swiping the card, or if you know the business to be reputable. Israeli cellphone/Internet companies, which are the worst class of Israeli (and I would venture to say human) suffering, They should be paid ONLY by a bank horat keva. It is much easier to cancel a huge error bank statement debit than credit card debit (which I would venture to say is impossible for the internet/cellphone companies).

5. WIth regard to checks, it is illegal by Israeli law to cancel or stop a check….. since the checks can be passed. You should alway put a black cross, and they can be ordered from the bank with the cross already printed on the checks with the Hebrew words with "L'Mootav Bilvad". If you notice, the check says in English "Pay to" and not as in the USA "Pay to the order of". meaning that the check can be passed. "L'Mootav Bilvad" with the black cross converts the check to USA style "Pay to the Order of" as my banker explained to me 15 years ago. Not crossing the checks is foolish and even dangerous if your check is refused after having been passed five times and ends up in the hands of the son of an Israeli underworld mob chief. No joke by the way. I have heard such stories in Haifa.

6. Depositing checks are a hassle. I always take an envelope and use the bank drop box if I don't have time to go into the branch. Usually that branch would open the envelope and deposit that check using the teller of that branch after the doors of the bank close. However, as of last month, I learned that Hapoalim now sends drop box checks to a central house for clearing which may delay deposit by a day.

Mark from Haifa said...

7. Mortgages are a class to themselves. You do not need an account at a particular bank to get a mortgage. You should print out copies of your last three pay stubs (husband and wife) and last three bank statements and SHOP between banks. You should compute how much you need from the bank and ask them for a line of credit for many times more than the amount you need. The mortgage department will allocate a line of credit and the conditions of the loan to be executed usually in a 1-2 month time frame. Therefore when you negotiate with a seller, you know a priori that the bank will give you the amount you need. You need the signed legal purchase contract and deliver the contract to the bank to get the loan but usually there is no change in the loan terms except if the prime rate jumped (which would affect all other mortgage banks anyway). if the time limit is up, you have to go back to get extensions on the line of credit. The worst thing that can break Israelis in home purchases is to sign a contract before getting a line of credit from a mortgage bank. Still there are a lot of things that can go wrong after that in that the lawyers of the mortgage bank do not like the way the particular property is registered in the land registry and may refuse to give the money. One buying a house better have a good lawyer first access the land registration and have line of credit approvals from the bank prior to going to contract even at the risk of losing their dream property. CPI Indexed loans are a robbery here in that the banks sets the initial index upon taking the loan considerably lower than the actual CPI so the principal owed after the first payment can be tens of thousands of shekels higher. I would go only with prime linked for loans on the order of 200000-400000 NIS.

8. Overdraft……some banks give better interest rates on overdraft than on credit cards. It is an optimization game. Hapoalim has 10% annual overdraft interest but credit card credit payments (TSHLUMIM with Credit of 6%). Benleumi is the opposite. Low overdraft but higher credit card interest rates. It is according to taste. Note that in the USA, the average American revolves $18,000 on credit cards with an average of 14-15% interest. That is "American overdraft" even though the banks do not let you go negative in the USA. I prefer the system here now, but it takes getting used to.

9. I have heard that the Bank of Jerusalem is an excellent bank (owned by Zalman Shoval's family if I am not wrong) but they have no coverage. I would not go anywhere near the Bank HaDoar if you have any significant bank deposits.

Miriam Bloomberg said...

Your blog entry greatly prepared us, so when we went to the bank today to open our account (which took 2 hours), we were more than prepared. We found out there was a fee for depositing too much money!!! It helped that the bank rep was a very sweet young woman who apologized for the long wait because her computer went down. We used some of the time to go to the Do'ar to pay the fee for registering for Kupat Cholim. Why do you have to pay the post office a fee for doing all sorts of random stuff that has nothing to do with the post office!?!?

Marina Shemesh said...

Great informative article!

Rachel said...

This is a late comment. But I find that most of the information posted by Mark assumes that all or most of us have money. I cannot get an Israeli credit card without securing it first with cash in an amount equal to the credit limit I want. I do not have any cash to secure it with. I have only a debit card that goes against my Israeli bank account. I do, however, have a few American credit cards, one of which has zero foreign transaction fees. And I have a debit card for my American bank account which has zero ATM fees (translates to zero foreign transaction fees). But I rarely use the credit cards. I have almost no debt -- not even a mortgage because I cannot afford to buy a house here. I try to live within my means -- a concept that I find is foreign to most Americans and Israelis....

Unknown said...

Rachel, I know flyertalk has a list of cards with no foreign transaction or ATM fees, but which ones do you use?

shimonafromthepalace said...

"When your credit card expires, they don't mail a new one to you (or even send a notification). You need to know by yourself to go to the bank and pick it up."

I was very surprised to read this, as it is certainly not true of my bank (Discount). In fact, I was rather alarmed at the fact that they simply mailed me my new card when the old one expired, since I had a neighbour who has been known to steal my mail.

Anonymous said...

Many Many thanks.

I did my alyah a few days ago and I've spent most of the evening trying to find a website, blog or anything that could help me choosing a bank and getting a good deal.

This blog is the best information I got so far. Thank you.

Reuven

A Jewish Woman said...

Reuven,

Welcome home! Be sure to see this post as well: http://bataliyah.blogspot.co.il/2013/06/paradigm-shifts-for-americans-banking.html

Meir Green said...

Great information. Thanks!

the sabra said...

Very helpful, thanks to everyone who contributed!

Anonymous said...

VERY IMPORTANT

"You can write a check with the payee blank. Your check will be passed from hand-to-hand as cash until someone decides to deposit it."

DO NOT DO THIS EVER!
When you write a check always write the name of the payee and make the check "lemutav bilvad". Even better you can ask to have your checks printed with this. That way no-one can ever try to talk you into giving them a nameless check. Why is this so important? Once the check is passed around, it can reach disreputable people and before you know it you have the mafia on your doorstep.

Credit card: my cc is "chutz bankai", i.e. not from a bank, and I pay no charges on it. Once a month the balance comes out of my account.

Some of these comments show a lack of personal financial management rather than a problem with Israeli banks. I recommend keeping an excel file which reflects expected income and expenses for the month, including their dates(including what you put on your credit card). The only surprises you should be getting are either a mistake on the part of the bank or hopefully an unexpected windfall.

Christelle said...

Dear Mark from Haifa,
I bank with Bank Hapoalim in Jerusalem. I need a good banker for my international wire transfers. Any chance that you would be able to share the name of your banker? I will get an email for follow up comments. Thanks!