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 buyers pay over 4,300 shekels extra compared to the original price.

The key difference lies between "installments" and "credit." Regular installment plans involve paying the product's fixed price over time without added costs. In contrast, credit deals are loans from credit companies that charge interest on the outstanding balance. The average credit card interest rate in Israel is 13.2%, compared to the Bank of Israel's base rate of 3.5%, explaining why spreading payments can significantly increase total costs.

For example, a 10,000 shekel purchase paid over 36 months at 13.2% interest results in monthly payments of about 338 shekels but a total cost of approximately 12,165 shekels. Extending the payment period lowers monthly payments but nearly triples the interest paid. Larger purchases and multiple simultaneous credit deals can quickly accumulate substantial debt, reducing disposable income.

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 installment plans labeled "no interest" may still include hidden costs, as the cash price can be lower than the installment price. Ultimately, the monthly payment amount alone is a misleading indicator; the total repayment cost is the critical figure.

Understanding these distinctions can help consumers make informed decisions and avoid unexpectedly high expenses when choosing credit purchase options.