Israeli Households Juggle Two Bank Accounts for Potential Savings
Many Israeli households are finding themselves with two bank accounts, even when aiming for a single consolidated account, as digital banks encourage this setup to offer better rates on deposits and other services. A common scenario involves a couple with a mortgage, two salaries, and a deposit. They might receive an offer from a digital bank for a higher interest rate on their deposit, conditional on transferring one salary. However, since mortgages cannot be transferred, the original bank account remains open to service the loan, leading to a dual-account situation.
Digital banks like ONE ZERO aim to increase the average number of accounts per Israeli to two. This strategy is driven by the fact that banks often pay incentives for salary transfers. By maintaining two accounts, customers can potentially benefit from these incentives while keeping their existing accounts for services like mortgages. This split typically involves having salaries, direct debits, and cards at one bank, and deposits or securities trading at another.
For instance, transferring NIS 10,000 monthly to ONE ZERO can grant access to its premium ONE+ plan (normally NIS 89/month) for free. A NIS 5,000 transfer unlocks the ONE plan (normally NIS 49/month) for free. In mid-2023, the bank also offered a 6% deposit rate up to NIS 100,000 for new customers meeting specific salary and spending criteria. This contrasts with a typical 3% rate at larger banks, potentially yielding an extra NIS 3,000 annually before taxes on NIS 100,000. A smaller interest rate difference of 0.75% on NIS 200,000 could save around NIS 1,275 net annually, justifying the cost of a second account for holding deposits.
Loans also play a role, with a 1% difference on a NIS 100,000 loan over five years accumulating to about NIS 5,000. Banks may leverage a customer's existing relationship to charge higher margins. The average Israeli household pays about NIS 31.6 per month for current account and card management, a figure expected to rise. Maintaining two accounts outside of basic plans can double these costs, potentially reaching NIS 240 annually for two basic accounts, or more if additional cards and services are involved.
Splitting investment portfolios across two banks can complicate tax reporting, as losses in one account may only be offset against gains in the other through an annual report, while each bank deducts capital gains tax independently. Furthermore, automated systems for redirecting salaries only work with full account transfers. Those opening a second account must manually update employers and tax authorities. Couples, especially those with significant income disparities, often opt for separate accounts for personal finances alongside a joint account for household expenses.
After three to six months, households can evaluate the financial benefits versus the costs of maintaining two accounts, considering deposit interest, free plans, and additional fees for cards and services. Full account transfers to a new bank leave mortgages and loans behind, necessitating a comparison of digital banks against traditional large banks to understand the product offerings and limitations of each.
