A Word of Caution: Money changers are subject to regulations set forth by the Israeli government for currency conversion and accepting money deposits. Please be sure to thoroughly check the credentials of any financial service provider before changing money or arranging bank transfers, and be aware of any risks involved.
Transferring money to Israel and converting it to shekels can be a costly endeavor. The following tips can help you save money when conducting these important transactions.
Steps to Take Before Making Aliyah
Arranging for Future Wire Transfers
In many banks in the U.S., Canada and the U.K., you must physically appear at your bank’s local office in order to to wire money overseas unless you make prior arrangements. Before making Aliyah, be sure to clarify what your bank's policy is and make the necessary arrangements which will enable you to transfer money upon giving your approval via phone or fax.
When preparing for Aliyah and budgeting your expenses in shekels, keep in mind that unless your savings are in shekels, you will be exposed to fluctuations in the currency market. This can mean that despite careful planning, your savings may not translate into the shekel equivalent sums that you anticipated.
Transferring Money to Israel
There are various methods used to transfer funds to Israel.
Foreign Currency Cash Transactions
Cash may be the easiest method of money transfer, but be aware of the restrictions or reporting requirements of both the financial institution from which the funds are withdrawn and the financial institution to which the funds are deposited. A deposit of 50,000 NIS (or the foreign currency equivalent) is reported to the tax authorities. This is not in of itself a problem, but it is important to be aware this fact.
Foreign currency cash transactions are usually the most fee intensive transactions in the local Israeli banking system. There are fees for depositing foreign currency into your account as well as fees for withdrawing foreign currency.
Foreign Currency Check Deposits
Funds deposited to your account via a check deposit are not available to you immediately. The collection time varies from 7 to 10 business days for US dollar collections and longer for other currencies. The collection period is somewhat negotiable. A check deposit fee is charged at the time of transaction – approximately $5.00 per check. After the collection period, the funds become available for conversion. At the time of conversion there is a transactional fee and a commission charged based on the "spread" between the conversion rate and the quoted exchange rate. In planning your cash flow, it is essential to take into account the collection period required before the funds become available.
Wire transfers are the safest and fastest method when transferring large sums of money.
Wire transfers can be done through an Israeli bank, an overseas bank, a private broker or a money changer. Upon receipt of the funds into your account, you will charged a fee of approximately 0.33% of the transaction. Some banks will allow you to arrange a flat fee for f/x wire receipts.
Banks, Brokers and Money Changers
If you need to transfer foreign currency to Israel, who should you turn to? There are advantages and disadvantages to each of the options.
Overseas banks tend to be the most expensive option of transferring shekels to Israel. They offer a lower exchange rate than do the Israeli banks. In addition, when you transfer shekels from overseas accounts, it takes several days for the money to appear in your account.
The cost of transferring money to an Israeli bank and subsequently converting the monies usually includes paying receiving charges, conversion charges, and currency exchange charges. While the fees may seem hefty, keep in mind the following:
- Your bank manager has an interest in keeping you happy. This is a long term relationship, and the bank may be open to making certain accommodations to ensure that it can keep you as a long-term customer. From your perspective, don’t forget that the bank offers important services such as loans and developing the relationship may have its own advantages.
- It is important to negotiate bank rates. While this may sound shocking to those of us coming from the U.S., Canada and the U.K., it is a part of the system here. Ask your manager for better rates, and see what happens.
If you use a broker, the broker can generally eliminate many of the relevant fees and, in addition, may offer a more favorable exchange rate for the currency conversion. In addition, brokers generally offer a high level of service and are comfortable communicating in English. When you use a currency broker, check that the broker is licensed and regulated as a currency broker by the Israeli Capital Market Authority. For a partial listing of brokers, please see www.nbnbusiness.co.il.
Brokers – as well as banks – offer additional services for individuals who need to make future shekel-based payments (for example, for a housing payment), and want to protect themselves against the volatility of the exchange rates and the currency risk. By buying an "insurance policy" you can guarantee future exchange rates. Forward contracts, for example, may (or may not) be financially beneficial, and it is best to discuss the ramifications of this decision with a licensed financial advisor.
If you are transferring sums of less than $3,000, it may be easier to transfer the funds by writing a check rather than a wire transfer. You can write the check to your overseas (US/Canada/UK) bank account, and cash it either at your Israeli bank or using a money changer.
Note that for sums that are greater than $3,000, it is generally less expensive to use a wire transfer.
If you cash a check at a bank, keep in mind that the banks maintain a 7 - 10 day waiting period for US dollar checks before the check is cleared and the money becomes available.
Alternatively, if you cash your check using a private money changer, you probably won’t have any waiting period and you can generally receive a better rate. For a partial list of money changers, please see www.nbnbusiness.co.il (look in the Finance category).
If you expect to be earning a foreign income but have bills to pay in shekels, keep in mind that you have a foreign exchange exposure. While the amount of your foreign earned income may be constant, the fluctuations when converted to shekels can potentially be significant, depending on the amounts that are transferred and the current rate. It is important to keep informed regarding current exchange rates and to budget accordingly.
A special thank you to the following individuals for their assistance in preparing this article: Daniel Engelsman (firstname.lastname@example.org), COO of IsraTransfer Ltd. and Hillel Suna, Branch Manager for Mercantile Discount Bank.