Dollars, Shekels, Banks, Credit and Transfers

with thanks to Marvin Schwartz - marsch@netvision.net.il posted on the Tachlis list October 3, 2002 and Russell Kallen for an update in May 2005.

I am a retiree and all my income is in dollars from a USA based pension and from USA Social Security benefits. These dollars are deposited electronically, every month, into USA banks that allow transactions on the Internet.

I've learned how to avoid some unnecessary bank charges and I pass this along to you. I've probably written more than you care to know about all this, so you're welcome to 'pick and choose' from what I've learned.

If you have any questions, please ask on-list so everyone can see the questions and answers.

• Israel Bank accounts
• Exchanging dollars for shekels
• Transferring US dollars to Israel for free
• VISA Cards from American Banks.
• Paying Bills automatically in Israel (Hora'at Keva).

2. Israel Bank accounts.

I joined the AACI www.aaci.org.il (do this first(!); AACI membership entitles you to special discounts when you open an account at an Israeli bank). Then I opened a shekel account at First International Bank of Israel (FIBI).

My shekel account at FIBI has two components:

a) CLOSED Israeli Shekels ('interest earning'). This is like a 'savings account' that MUST be *closed* for some period of time, a week, a month, ...or more.

b) OPEN Israeli Shekels ('no interest'). This is a 'checking account.' I can write checks on this part of the account or withdraw money from this part of the account at a FIBI ATM. When people go into 'minus' (pronounced MEENUS) this is the part of the account that is overdrawn -- *EVEN IF YOU HAVE ENOUGH MONEY IN THE CLOSED PART TO COVER THE OVERDRAFT*.

FIBI has a web site. You can view the balances in the 'CLOSED' and 'OPEN' components of your account. You must apply in person at your FIBI branch for the necessary password. The FIBI URL is:https://www.fibi-online.co.il/web/fibiwwwc

[then click on "new customer" for info]

Once I know my balances, I can transfer Shekels from the 'CLOSED' to the 'OPEN' component by making a phone call to the bank. Back to top ^

Exchanging dollars for shekels.

The Currency Exchange Rate is an open market rate, which means that it is changing all day long as transactions are made. At any given moment during the day, the prices might be listed as follows:

Selling 5.0122
Buying 4.9278

...which means that if you want to *buy* shekels -- for one dollar you will receive 4.9278 shekels -- and if you want to *sell* shekels -- for 5.0122 shekels you will receive one dollar.

In an open market situation, there is always a 'spread' between the buy and sell prices; the spread stays pretty much the same all day long as both the buy and sell prices move up and down together. [Note: I have used the 'Transfer and Check' rates in my example. The 'Cash' rates for that day are 5.08 and 4.86.]

[If you don't understand that last paragraph, don't worry about it. Any given transaction during the day is only slightly different from the transaction that occurred immediately before it -- and the direction that the prices move depends upon who is initiating the
transaction. That's basically how markets work.]

People at the Bank of Israel (BOI) have been following these fluctuations all day long. At about noon or so each day, they decide on a kind of weighted average somewhere between the Selling and Buying prices and they call it the "Representative Rate." This
'exchange rate' between dollars and shekels is the legal rate for that day and is the rate that is referred to in contracts (such as apartment rental contracts) that depend upon an exchange rate.

In the example I used above, the Representative Rate was 4.9830 and shows up as follows:

Selling 5.0122
Rep Rate 4.9830
Buying 4.9278

The example was taken from data of 21-June-2002. The Representative Rate is listed in the Jerusalem Post, Ha'Aretz and elsewhere. You can get both current and historical data at BOI's website,<http://www.bankisrael.gov.il>.

For all practical purposes, you DO NOT exchange dollars for shekels at the official 'Representative Rate.' You will be 'buying shekels' and you will get an exchange rate substantially lower than the Representative Rate. "How much lower" will depend upon the method you use for the exchange.

a) Using my NETBANK ATM card, I can withdraw shekels from a Bank Hapoalim OR Bank Leumi ATM. This method will give me an *excellent* exchange rate, precisely 99 percent of the Representative Rate of the _previous_ day! The dollars come out of my Money Market account immediately. There is no commission and no ATM charge. Using our example (assuming the Representative Rate is the same as the previous
day) the exchange rate will be approximately 4.9332.

b) As an AACI member, FIBI will exchange dollars for shekels WITHOUT COMMISSION. Using our example of 21-June, FIBI will give you approximately 4.9278 shekels to the dollar. THIS WILL CHANGE THROUGHOUT THE DAY! Remember that FIBI's actual exchange rate is NOT determined by the Representative Rate; it is actually the reverse (see above).

c) You can exchange dollars for shekels at places other than banks. There are storefront businesses that specialize in money exchange; in my limited experience with them, I've found their exchange rates are not as good as the banks' rates.

d) There are money changers in the streets (black market/gray market???); I know very little about them. Some people swear by them -- some people swear at them. :-)

When I need a large sum of money, I have dollars wired to me (FREE money wires from Vanguard, see below) and then phone FIBI to exchange the dollars for shekels (method b). I do this twice a year, when my six month apartment rent is due.

I use my NetBank ATM card (method a) to exchange my dollars for shekels the rest of the year. Back to top ^

Transferring US dollars to Israel for free.

I opened a Money Market Reserves Mutual Fund (Fund # 30) account at Vanguard, an account that offers telephone wire privileges. Vanguard will wire amounts of $5000 or more to Israel for free and smaller amounts for a $5 fee.

Whenever I need a large amount of dollars wired to me in Israel (to put into my FIBI bank account), I purchase shares in my Vanguard account and then phone Vanguard (a free collect call -- 610-669-1000) and have them wire money to my FIBI account in Israel.

In all other respects, a Vanguard Money Market Reserves Mutual Fund account serves as a 'savings account,' although it is not FDIC insured.[Others on the Tachlis List have recommended Schwab, Fidelity, T.
Rowe Price and possibly other firms which offer similar services; you should check these firms to find out which best meets your needs.]

The URL for Vanguard is <http://www.vanguard.com/>. Their site should have answers to all your questions about opening an account with them.

To transfer smaller amounts of money, I use my NetBank ATM card and receive the money in cash shekels -- at an excellent exchange rate. Back to top ^

VISA Cards from American Banks.

There are two kinds of VISA cards, CREDIT cards and DEBIT (or CHECK) cards. As opposed to granting you credit for purchases, DEBIT (or CHECK) cards take the available money out of your bank account immediately. It's as if you wrote a bank check on the spot and the bank cleared the check instantly. There are advantages and
disadvantages to both kinds of cards.

Whether it's a Visa CREDIT card or a Visa DEBIT (or CHECK) card, this is how ALL Visa card purchases work. All these purchases go through "Visa International," where the foreign currency purchase amount is converted into dollars and that amount is reported to your bank in America.

The conversion, as related in the fine print of your Agreement with Visa, uses "...either (1) a wholesale market rate or (2) a government-mandated rate in effect one day prior to the processing date, increased by one percent in each case."

Basically, this means that the exchange rate you will get is approximately 99 percent of that (previous) day's Representative Rate. This is good, this is very good! In my experience, it's always been better than what your bank will give you!

You will ALWAYS get this rate when you use an ATM or Visa DEBIT card.

As for CREDIT cards, most American VISA CREDIT cards charge the consumer an extra three percent (3%) on all foreign currency purchases, that extra two percent being pure profit to the banks that have granted you credit. I make all possible personal purchases (even at the supermarkets, for food) using my VISA Card. Since I don't have to pay these amounts for a month or so, I save money by earning interest in the USA. I pay the VISA Card electronically, so my VISA bill is always paid on EXACTLY the due date. Back to top ^

Paying Bills automatically in Israel (Hora'at Keva).

When I want to write a shekel check to pay a bill, I write a shekel check on my FIBI OPEN account. I use FIBI's web site to keep track of my CLOSED and OPEN balances and transfer between them (by phone) if it is necessary.

Every bill that comes to me 'regularly' in Israel (from Kupat Cholim, Cable TV, Electricity, etc.), is paid automatically from my FIBI account by a "hora'at keva" (standing order) -- so I don't have to write out shekel checks every month.

Israeli banks charge fees for paying bills by use of a "hora'at keva" (standing order). For me, personally, avoiding the inconvenience of paying monthly bills is much more important than the fees. I haven't checked the fees precisely but it seems that the 3% or so that I earn on the 'CLOSED' portion of my account with FIBI more or less offsets
whatever fees the bank charges me for making "hora'at keva" payments.

You can pay bills in other ways, by phone, at the post office, at the bank in person, etc., and I have paid occasional, non-regular bills (car registration, for example) at the post office.

Back to top ^

Excerpt from the NBN yahoo list

I wanted to share my research in avoiding fees as much as possible in wiring and withdrawing US Dollars and converting them to Shkalim in Israel. Nefesh B'Nefesh's website: http://www.nbn.org.il/rights/dollars_shekels_banks_credit_transfers. has very detailed suggestions. (A great Yasher Ko'ach to Marvin Schwartz and Russell Kallen for sharing their research.) I wanted to add my own research.

Exchange Rates At banks or Money-Changers, you will always get a lower rate (the "buy rate") than the "representative rate" or "sha'ar yatzig". See below for my experiences comparing bank vs. money changer rates.

Wiring from American accounts to Israel for Conversion to Shkalim
There are many places for added fees:
1) The fee for wiring from the US account.
2) The fee of the "correspondent bank" -- the middleman bank -- which actually does the wiring.
3) The fee for receiving the wire in dollars on the Israeli bank side.
4) The fee for exchanging the money to Shkalim.
5) The hidden fee included in the "buy rate" being lower than the "representative rate" in exchanging the money to Shkalim.
Here are my recommendations to avoid these fees as much as possible and save 1000s of Shkalim over time.
1) As the NBN article indicates, use an account which offers free wires. In addition to the recommendations in the article, Washington Mutual currently offers free wires of any amount domestic or international. I have used them successfully many times. You can arrange with a branch while still in the US to authorize wiring by phone and you phone them and then fax them a form. It sounds like Vanguard or the like is more convernient in this regard not requiring the fax. (I found out the Washington Mutual will let you just wire by phone for a $10 fee without the need for the fax but cannot confirm this.)
2) Each wire uses a "correspondent bank" which actually does the transfer, not necessarily your bank. It usually defaults to a certain bank but you can choose your own. I have found that HSBC (the default at Washington Mutual) charges $15 (the wire will come into the Israeli destination minus $15) but JPMORGAN-CHASE charges nothing.
3) Receiving a dollar wire in an Israeli bank usually entails a fee as well. I do not know if all banks do or possibly waive it for new Olim. I believe Bank of Jerusalem, for example, does. However, you can wire money to a money-changer -- obviously you have to trust the money changer. I have used Cheerfully Changed in Ramat Beit Shemesh without any problems many times. The money-changer usually will not charge anything for receiving wires above a certain amount ($10,000 - $25,000 for example) and will offer a free wire transfer or sometimes several transfers once converted to Shkalim to your Israeli account or accounts you specify (builder, etc.).
4) Usually banks charge a fee for exchanging money (0.15% for example). Apparently, sometimes this fee is waived. The article on NBN says AACI membership allows this fee to be waived. A relative indicated that at least some banks will waive it for all new Olim. A money changer does not charge an additional fee for exchange.
5) I found that money changers offer slightly better rates than the banks without a "special deal". Marvin Schwartz in the article found otherwise. But overall, I still think the money-changer is a better deal.

Cashing Checks
Cashing checks can be done at a money-changer instantly also who will usually charge 1.5% of the check plus use the lower "buy" rate for the exchange. Some, such as Cheerfully Changed offer a 1% fee for new Olim. In this case depositing it in a dollar account in a bank and exchaning it might come out better. But this might have a long clearance time. You have to check with the bank. Of course, if it's a third-party check, the check could be mailed back to a US bank for depositing and then the funds withdrawn either via wire or ATM.

Using Israeli ATMs
Most US banks will allow you to withdraw from your US accounts via Israeli ATM -- make sure to have a 4-digit pin rather than 6. Some banks charge fees up to 1% of the funds withdrawn. As the NBN article indicates, NetBank does not charge a fee. They told me you can open an account even if already in Israel and fund it with another American account provided you give them an US address (relative, etc.)

I hope this information is helpful and can be shared with other potential Olim or Olim already in Israel.

Yakov Haber KGH -> RBS, Yad Binyamin NBN Aug 2007

Comments,feedback, criticism to danny@nefeshbnefesh.org