Israelis Favor Low-Interest Short-Term Deposits Over Higher-Yield Funds

In September, 43% of public deposits shifted from checking accounts to short-term deposits offering negligible interest rates, according to Bank of Israel data. Approximately 14 billion shekels were deposited into accounts with terms of up to one month, including daily and weekly options, yielding an average annual interest rate of 1.36%, which likely results in a real-term loss of value. Daily deposits alone accounted for about 6.3 billion shekels, with an average interest rate of approximately 0.67%.

Despite the availability of money market funds, which offer a more attractive alternative with expected annual yields of 3% to 3.25%, the public deposited a maximum of 4.6 billion shekels into these funds. This means short-term deposits attracted more than three times the amount invested in money market funds.

The next most popular option for savers was fixed-interest deposits for six months to one year, attracting about 8.6 billion shekels with an average annual rate of 3.54%. Another 4.72 billion shekels were placed in fixed-rate deposits for one to five years, averaging 3.16% interest. Fixed-rate deposits for one to six months saw 4.1 billion shekels deposited, with an average rate of 2.63%.

Among one-year fixed-rate deposits, two smaller banks led in interest rates: One Zero offered 6% for new customers with deposits up to 100,000 shekels, followed by Bank Jerusalem at 3.6%. For one-month variable-rate deposits, which attracted 1.75 billion shekels, Bank Jerusalem offered a median rate of 2.75%, with One Zero at 2.5%. In fixed-rate deposits for one to two years, Bank Yahav offered the highest rate at 3.8% on about 3.5 billion shekels deposited, while Bank Massad offered 1.9% and Discount offered 2.4%.