Bank of Israel unveils a new flat-fee checking account plan, but savings may be limited

The Bank of Israel’s banking supervision unit published its final overhaul of checking account fees on Sunday, introducing a new charge called “payment account management.” The fee will cover regular checking account activity plus basic services such as cash deposits and withdrawals, transfers, standing orders, and printing or locating documents. Banks will be allowed to charge households and small businesses up to 10 shekels a month for up to 100 transactions, with each additional transaction capped at 1 shekel.

The central bank says it wants to create a shift similar to the one seen in mobile telecom, from pay-per-action pricing to an all-in bundle, even if the financial effect on households will be modest. Today’s fee structure is complex, with charges often depending on whether a service is handled by a clerk or through a “direct channel.” Bank of Israel first tried a package-based reform in 2014, requiring a basic plan for households and small businesses with up to 10 actions for up to 10 shekels a month, plus a wider plan. That reform reduced average checking fees from 16.6 shekels in 2014 to 10.8 shekels in 2021, but only about 15% of customers signed up for the packages, and 24% still paid more than 10 shekels without joining.

Under the new system, the basic plan will expand to 100 actions and become the only available option, taking effect in July 2027. For most households, the saving is expected to be limited because the current average fee is 11.5 shekels a month, but the new structure should improve transparency and make it easier to compare banks and bargain for better terms. Small businesses, which currently pay an average of 18 shekels a month, are likely to see a more noticeable benefit.

The reform will also affect groups differently. About 24% of the roughly 8 million household and small-business accounts currently pay more than 10 shekels a month outside Bank of Israel’s package system and should pay less once the change begins. Another 5% are in expanded packages up to 30 shekels a month and will pay less while gaining more transactions. Some 10% are in the basic plan and will not see lower fees unless they exceed its limits, though they will be able to do ten times more activity. By contrast, 31% of accounts currently pay no checking fees at all, usually after negotiating with the bank, and should see no change. The reform will also help 8% of inactive accounts, which will no longer be allowed to incur certain fees.

Critics, including Lobby 99 and Ratz Nakhi, argued that 22% of accounts that now pay less than 10 shekels could end up paying more, especially those doing only a few monthly transactions. In response, the final version adds a lower tier, capping fees at 5 shekels for up to two actions a month, though customers making three actions and paying 6 shekels today could still pay more. The reform also caps debit card fees at 7 shekels a month starting in October, drops several outdated charges, limits the fee for changing a mortgage repayment date to 5 shekels, and points to broader future changes in securities and foreign-exchange fees.