Buying for 20 thousand shekels, paying another 4,300: how much does a credit deal really cost?

“Would you like to split this into installments?” This is an almost automatic question at the checkout, especially when the amount starts to climb. A refrigerator for 10,000 shekels sounds like a large expense; 338 shekels a month sounds completely different. But hidden between these two numbers is an important question: is this just a spread of payments, or have you actually taken out a loan? If it is a credit deal with an annual interest rate of 13.2%, after 36 months that same refrigerator will cost more than 12,000 shekels.

This gap is important because the word “installments” describes different products in Israel. In a regular installment deal, where the business allows 6, 12, or 24 payments and the product price does not change, the customer simply pays the purchase price over time. In a credit deal, by contrast, the credit card company finances the spread and charges interest on it. From the household's perspective, this is a loan taken at the moment of purchase.

The average interest rate on credit card credit deals is around 13.2%, while the Bank of Israel interest rate is 3.5%. The gap explains why the convenience of the spread can quickly turn into an expense of hundreds or even thousands of shekels.

The Math of Overpayment

338 shekels a month sounds like a little — until you add up 36 months.

Let's take, for example, a purchase of 10,000 shekels with an annual interest rate of 13.2%:

1. When spread over 12 months, the monthly repayment reaches about 894 shekels and the total amount to about 10,729 shekels (an extra 729 shekels).

2. When spread over 24 months, the payment drops to about 476 shekels, but the total cost rises to 11,433 shekels.

3. When spread over 36 months, the repayment looks especially comfortable — about 338 shekels, but the purchase ends at a price of 12,165 shekels.

Extending the spread from 12 to 36 months lowers the monthly charge by more than half, but almost triples the interest cost.

For a purchase of 20,000 shekels, the numbers are even more prominent. Over 36 months, the total cost reaches 24,329 shekels. A product priced at 20,000 shekels can become more expensive by more than 4,300 shekels following one decision: to spread the payment over three years on credit.

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When the debt becomes 50,000 shekels

The problem grows when several such deals are managed in parallel. Suppose a family holds three credit deals: furniture (20,000 shekels), a vacation (15,000 shekels), and electrical appliances (15,000 shekels). Together, this is 50,000 shekels. When spread over three years, the total cost exceeds 60,800 shekels — about 10,800 shekels beyond the original amount. These obligations reduce the disposable income of the coming months and years in advance.

Regular installments, credit, and revolving credit

1. Regular installments: A product costs 12,000 shekels and the business allows 12 equal payments of 1,000 shekels. The price remains 12,000 shekels.

2. Credit deal: The credit company provides the customer with credit, spreading the purchase over months, and charges interest on the remaining debt.

3. Revolving credit: The customer sets a fixed monthly charge (e.g., 5,000 shekels), and if expenses are higher, the remainder moves to the next month with interest. This can be even more expensive, with interest rates reaching 15%–16%.

Should you look for alternatives?

Credit is a loan, and therefore before choosing it, you should compare it to a regular bank loan. If the credit deal bears an interest rate of 13.2% and you can get a loan at 8.5%, the gap in interest is translated directly into money. It is also worth checking the cash price: sometimes a store offers a discount for a single payment, and that difference is effectively the cost of the spread.

Before answering at the checkout how many payments you want, the more important question is how much the purchase will cost until the last payment.