Israeli Bank Account Transfers Leave Loans, Safes Behind

While less than one percent of Israeli bank accounts switch banks annually, a reform has doubled the likelihood of customers moving, with around 350,000 transfers occurring by the end of 2025. However, customers who do switch often discover that while many aspects of their account move seamlessly, significant items like loans, mortgages, and safe deposit boxes remain with the old bank, requiring separate handling. This often becomes apparent only when attempting to close the original account.

A directive effective since September 2021 mandates that bank account transfers be conducted online, free of charge, and completed within seven business days, or up to 30 days if requested by the customer. Automatically transferred items include credit and debit balances in shekels, standing orders, direct debit authorizations, checks issued, most Israeli and foreign securities, and bank debit cards. The process freezes the account on the transfer day, with funds arriving at the new bank on the seventh day. Customers can retract their transfer request up to the end of the sixth business day.

Loans, mortgages, deposits, savings plans, blocked securities, safe deposit boxes, and pledged assets are not transferred and must be settled separately. To fully close an old account, customers must repay loans or refinance them with the new bank, redeem deposits, or wait for maturity, and empty safe deposit boxes. Failure to do so results in the old account remaining active, incurring ongoing management fees, and the customer paying two banks simultaneously. Mortgages can be refinanced elsewhere, but this is a separate process, and the old current account typically remains open to service the monthly repayment.

While a "follow me" service redirects credits and checks to the new account for up to three years, this is a temporary solution. Bank of Israel is proposing to extend this redirection service until October 2029 for those who have transferred or will transfer accounts since the reform. Customers must still directly update employers, the National Insurance Institute, and the Tax Authority, as redirected funds will be returned to the sender once the service ends. Recurring charges linked to non-bank credit cards, such as for Netflix or insurance, will cease if the old card is canceled and must be transferred to a new card before cancellation.

Transfers can be blocked by account overdrafts, liens, guardianship, deceased accounts, bankruptcy proceedings, recent previous transfers within three months, or pending transfers to another bank. Customers must resolve these issues before reapplying. The process of closing a dormant account involves a written request to the bank, with customers advised to obtain confirmation and a final zero-balance statement. Any remaining credit balance after settling debts must be returned to the customer. In 2025, approximately NIS 33 million was returned to 300,000 customers due to issues like overcharging of fees and interest, according to bank supervision reports.