Thursday, August 3, 2017
What you need to know before you pay for something in "tashlumim" (installments) on your credit card:
Welcome to Israel! It's great that you're here. I know life here can be confusing at times, so I'm going to try to help you decode everyday life a bit. Have you noticed how when you shop, you are often asked, "tashlumim?" as you hand over your credit card? Many new olim wonder what on earth this is. So here's a quick rundown of what you need to know:
Tashlumim - Installments - break whatever your total for this particular purchase is into equal monthly installments. You will be asked "how many tashlumim?" and you'll have to choose how many, if you are going this route. So if your bill is 2000nis, and you choose 10 tashlumim, you'll be paying 200nis for each of the next 10 months (as an example). Tashlumim are only available when you use a credit card that was issued in Israel, even if they ask you when you use a foreign card. They just aren't inspecting your card to see where it's from!
Tashlumim are usually interest free. But not always. They can be "Credit" payments that come with a fee and interest (and it will be credit card interest, which is usually quite a high percentage)! Beware of paying water or electric or other bills in tashlumim - they are often "Credit", as is the default at Ikea. Also, at self checkout in Shufersal, you may be given a "Credit" option! This is not regular tashlumim - it incurs fees and interest! Regular tashlumim do not incur a fee, since the BOI stepped in a few years ago and made them free. (That doesn't mean there are no consequences, though, so please read on...)
Tashlumim do not allow you to make a purchase larger than your credit line. Your credit line is set by your bank - and you are not allowed to charge more than that amount on your credit card. Splitting a purchase into tashlumim does not mean that you can use next month's credit line too: Your credit line is finite.
Let's say your credit line is set at 10,000nis. You will be allowed to charge up to 10,000nis and NOT MORE on your credit card in a billing cycle. Then, when the money goes out of your checking account on a preset date (usually the 10th or 15th of the month), your credit line is cleared for more purchases. HOWEVER - if you split a purchase into Tashlumim, your credit line will be tied up.
Here's how it works - you make a purchase for 5000nis, and choose to pay it in 5 tashlumim. Each installment is 1000nis. But 5000nis of your credit line gets locked away until the purchase is paid off in 5 months! So you won't be able to make another large purchase, if it means you'll exceed the 5000nis in credit line that you have left.
Sometimes paying in tashlumim make sense. Other times, it really doesn't. I recommend never paying in tashlumim for every day purchases - rather, budget appropriately and make sure you're not spending more than you can afford on the every day things. Once in a while, a large purchase comes up, and paying for it using a no-hassle, interest free payment plan (what tashlumim are, in reality) can make life easier. It certainly beats taking out a 5000nis loan to cover an expense. Don't do it all the time, though. You'll find you've overspent really quickly.
Tashlumim are not unique to Israel, by the way. They just get presented differently in other places (think of how many times you heard something would cost $X per month if you make 12 equal monthly payments - I'm guessing you've heard that - THAT, my friends, is "tashlumim" in a nutshell)! They are a way of making items FEEL more affordable, so be CAREFUL! I don't like it when you look at prices for items, say furniture, and the price is the monthly payment they assume you would make, if you are paying in 12 tashlumim! I feel like people don't bother to do the math and check how much they are ACTUALLY paying, because the monthly payment feels comfortable enough.
Don't fall for it - do the math! Make sure you know how much you're paying before you purchase. And ONLY use tashlumim if you are sure you can pay it off in a reasonable time frame and if this purchase warrants it.
Tip: Try to never have more than one purchase at a time on Tashlumim, and budget for it and make sure that there is enough money to cover the large expense over the next X number of months, in additon to your ongoing, regular expenses. And then WAIT before making another large purchase, until you've paid off the first one in full, and even longer, so you can build up some savings.
Leave a comment if you have questions about tashlumim, and I'll do my best to answer!