In April of 2012, I wrote a popular post about banking in Israel. It was based on tidbits I picked up over time and some advice from other olim. There's a lot of good info there, and I encourage you to read that post too.
I'm returning to the topic because tonight, courtesy of MATI, Israel's small business service center, I heard a lecture all about banking in Israel. The lecture was given by former banker and Financial Consultant Rifka Lebowitz. Rifka's first language is English, so she was able to clearly communicate things that many olim stumble upon and maybe, eventually, if they're lucky, figure out.
If you're new in Israel, or on your way here, the best advice I can give you is to forget all your assumptions about how banks work. There are certain paradigm shifts you need to make in order to understand the banking system here.
Paradigm Shift #1: FEES - Israeli banks think of themselves as service providers. Each service they provide has a fee attached to it. As an example, just as you pay for each can of peas you buy in a grocery store, so you pay for each transaction that occurs in your account. Transaction fees range from 1.35 NIS up to 2.90 NIS/transaction. Teller transactions cost more - from 5.50 NIS to 6.80 NIS.
There are fees for everything you do inside your account.
Once you've established a relationship with a banker (something Rifka highly recommends), you can negotiate these and other fees but you cannot eliminate them. There's no such thing as free checking in Israel. Kacha Ze.
Postscript: After this post was published, a few people mentioned that members of the Israeli teachers' union (and perhaps other unions) can get very significant reductions in bank fees.
Paradigm Shift #2: BRANCHES - The Bank of Israel is the government's regulatory bank. Beneath them are five main banking groups - Bank Leumi, Discount Bank, First International Bank, Bank HaPoalim and Mizrachi-Tefachot. There are some private banks that operate outside this system, but these are the major players.
You have to think of each branch operating like an independent franchise. Most transactions cannot be handled at another branch of the same banking group. When you establish your account at one particular branch, that becomes your bank. Bank branches are not interchangeable in Israel. Kacha Ze.
Paradigm Shift #3: PASSING CHECKS - In Israel, third-party checks are a kind of black market currency. Let's say you wrote a check for 500 NIS to the woman who runs the local preschool. Even if you made the check out to her specifically, she can use that check just like cash to buy groceries. And the owner of the grocery can use it to pay his mechanic. And so on. Your original check can be used like cash, circulating all over Israel for up to 6 months, before anyone actually attempts to cash or deposit it. Kacha Ze.
There are ways to avoid this happening to your check. You can get your checks pre-printed with two parallel black lines (called "cross") and the words l'mutav bilvad inside. This is a signal to the bank that the check cannot be transferred to a third party (or a 4th or a 12th).
You can draw the lines and write l'mutav bilvad on your checks. But the best protection is to have the cross and l'mutav bilvad printed on your checks from the very beginning.
Paradigm Shift #4: ACCOUNT STRUCTURE - In Israel, each account has different sub-accounts. So you have one main account which might include sub-accounts for savings, checking, investments, etc. This one is not so hard to accept, but it is important to understand if you come from the US where each account has its own account number.
Paradigm Shift #5: KNOW YOUR BANKER - Bankers in Israel have a lot of discretion and it's important to have a good working relationship with one. Unless you're fluent in Hebrew, find an English speaking banker and make sure he or she knows you. Your banker can make a lot of things happen to your benefit - letting a check through when you have insufficient funds, raising your credit/debit card limit, extending overdraft, reducing fees, etc. Israel is the Middle East. Knowing your banker is your protexia (Israeli protection) for getting anything even slightly out-of-the-ordinary done at the bank. The good news is that decisions are not made by some anonymous bureaucrat who doesn't know you, but by a banker in your local branch who actually does.
Paradigm Shift #6: CREDIT RATING - There is no national credit rating system in Israel. But your bank is keeping tabs on you, assessing your banking behavior and your general responsibility with handling your account. You'll be assigned an internal rating according to the bank's algorithm (which you'll never officially know about). Kacha Ze.
Paradigm Shift #7: CREDIT CARDS ARE REALLY DEBIT CARDS - You have a monthly credit limit and you can charge up to that limit. At the end of the billing period, the entire balance is deducted from your account. There is no such thing as making a minimum payment and thereby accumulating credit card debt.
Further, if you're really new in Israel and have no financial resources to speak of, you might be issued a direct card, which means that each transaction will be debited from your account (with a fee for each one) as you incur them. Kacha Ze.
I wish someone would have explained all this to me when I first arrived. It's not rocket science, but it does require you to make a few paradigm shifts.
Just remember Dorothy. You're not in Kansas anymore.