Tuesday, October 19, 2021

Credit Cards in Israel (including what you need to know about Tashlumim)

This post was originally published in 2017. It's 4 years later, so I'm putting out an updated version.
Here's a QUICK primer about Israeli credit cards:

Israeli credit cards are not like American ones (sorry, I don't know how British/European cards work, yet). They are inherently attached to your bank account, so you'll see the charge for your card's balance deducted from your checking account AUTOMATICALLY on the due date. And not just a minimum fee - the entire balance will be deducted in most cases. You can set up certain cards - but not all - to deduct less than the full balance, however, your interest rates will be sky high and I do not recommend doing this if you can avoid it. 

Also, please note that in order to qualify for a credit card in this country, you'll need to meet your bank's requirements. And your first credit card will be from your bank. Only after you have established a credit card that is issued by the bank where you hold your checking account will you be able to apply for another type of card (such as the ones offered in supermarkets or other chain stores). Bank-issued cards tend to have low credit limits. The other cards can have much higher credit limits.

Note: your Israeli credit card is inherently tied to your Teudat Zehut (government-issued ID), and often you'll be asked to verify your Mispar Zehut (ID number) when you pay for something using your credit card. This is a fraud-prevention measure and is considered pretty standard.

When you whip out your credit card, you can often choose to charge your purchase "regular" or "tashlumim". 

What you need to know before you pay for something in "tashlumim" (installments) on your credit card:

So here's a quick rundown of what you need to know about these payment options:

Tashlumim [Installments] divide your total for a particular purchase into equal monthly installments. When you're at the checkout (in person or online) you may be asked "how many tashlumim?" You'll then choose how many installments you want if you're going this route. So, for example, if your bill is 2000nis, and you choose 10 tashlumim, you'll be paying 200nis for each of the next 10 months. 

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! Don't try it with your US card, the charge will not go through.

Tashlumim are interest free. But not every method of paying installments is "tashlumim"! Some stores offer "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 utility bills in tashlumim - they are often "Credit" payments and not fee-free. Some stores also offer credit payments instead of tashlumim. Check carefully.

Be aware that tashlumim do not allow you to make a purchase larger than your credit line! Your credit line is set by the bank that issued your card - and you are not allowed to charge more than that amount on your credit card in any given month. Splitting a purchase into tashlumim does not mean that you can use next month's credit line too: Your credit line is SET,

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! It seems that the "locked amount" decreases with each payment you make, so one month later, you'll have paid off 1000 NIS but 4000 NIS will still be locked. 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 everyday purchases - rather, budget appropriately and make sure you're not spending more than you can afford on the everyday 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 addition 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.

Feel free to comment below if you have questions about tashlumim, and I'll do my best to answer!

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