Israeli Teens Can Get Credit Cards, Loans, But Face High Costs
In Israel, individuals aged 16 to 18 can obtain credit cards with parental consent, featuring a "minor" or "youth" designation. These cards have daily ATM withdrawal limits of 400 shekels, and banks set personal credit limits, with violations leading to card cancellation. Prepaid cards are available from age 14, and debit cards from 14 to 16 with parental approval, or without if the minor is employed and earning income.
The key distinction lies between prepaid/debit cards, which use existing funds, and credit cards, which involve borrowing from the bank and incurring interest. Overdrafts, especially beyond approved limits, are costly, with annual interest rates starting around 11% for small overdrafts within limits and escalating to 17% or higher for larger overdrafts or exceeding limits, plus additional fees. A consistent 5,000 shekel overdraft at 13% interest can cost approximately 650 shekels annually, excluding quarterly credit allocation fees.
Installment plans on credit cards are often interest-free for the consumer as the merchant absorbs the cost. However, "credit transactions" involve longer repayment periods with the credit card company, incurring interest. Buy Now, Pay Later (BNPL) services, while appearing as convenient payment options, are legally considered loans from non-bank entities. These services, which generate over a billion shekels annually in Israel, require explicit consent and can be canceled if the transaction or product delivery is canceled. Minors under 18 have additional protections; credit purchases or services are void without parental or guardian consent, and individual credit agreements can be canceled. BNPL can become costly due to the accumulation of small monthly payments from multiple purchases, making it crucial to track all outstanding commitments.
Loan offers in Israel are capped by law, with the maximum annual cost of credit typically around 18% (based on a 3.25% central bank rate plus 15%), though shorter-term loans may have slightly higher ceilings. It is essential to compare loan offers based on the effective annual interest rate (which includes all fees) rather than just the nominal rate. A fair offer presents the loan amount, number of payments, monthly payment, and total repayment sum. Upon turning 18, individuals' credit history, including loans, repayment behavior, and overdrafts, is recorded in the national credit database, influencing future borrowing costs.
