Credit Purchases in Israel Can Cost Thousands More Due to Interest Over Time

In Israel, credit purchase deals often appear as simple installment plans but actually involve interest-bearing loans. With an average annual interest rate of about 13.2%, a purchase of 20,000 shekels spread over three years can end up costing more than 24,300 shekels. This means consumers pay over 4,300 shekels extra compared to the original price.

The key difference lies between regular installment payments and credit deals. In a standard installment plan, the product price remains unchanged and is simply divided into equal payments. However, credit deals involve financing by a credit company that charges interest, effectively turning the purchase into a loan. The average credit card interest rate is around 13.2%, much higher than the Bank of Israel's base rate of 3.5%, which explains the significant additional costs.

For example, a 10,000 shekel purchase with a 13.2% interest rate paid over 36 months results in monthly payments of about 338 shekels but a total cost of approximately 12,165 shekels. Extending the repayment period lowers monthly payments but increases total interest paid. For larger sums, such as 50,000 shekels spread across multiple credit deals, the total cost can rise by over 10,000 shekels.

Consumers are advised to compare credit deals with regular loans, which may offer lower interest rates, and to consider all fees and repayment terms. Additionally, some "interest-free" installment plans may include hidden costs, as the cash price can be lower than the installment price. The article stresses the importance of understanding the total cost rather than focusing solely on monthly payments.

Ultimately, credit deals can be a useful financing tool if consumers are aware of the full cost and can manage repayments. Problems arise when decisions are made based only on affordable monthly payments without considering the overall expense.