Most don't know: High interest on credit cards and how to save
Credit cards are often seen as a tool for expense control, but the "fixed charge" feature hides an expensive revolving credit. Here is why installments and deferred payments are economically disadvantageous.
The offer sounds convenient: you set a fixed amount to be deducted from your bank account monthly, and the remaining balance is carried over. The charge appears predictable, the account gets breathing room, and the customer feels in control of their budget. However, behind the phrase "fixed charge" lies revolving credit. The difference between total transactions and the collected amount becomes interest-bearing debt. The next month, new purchases are added, interest is charged on the previous balance, and an updated debt is created. When expenses exceed the set monthly amount, the balance grows even while the customer transfers thousands of shekels to the credit card company monthly.
The interest rate on such a product is around 15%, which is high compared to many consumer loans, especially with the Bank of Israel interest rate at 3.5%. The gap reflects the cost of convenience and the lack of a defined end date. A balance of 50,000 NIS remaining for a year at 15% annual interest can grow to about 57,500 NIS, and within two years, it may approach 66,200 NIS. In an active plan, the principal may remain high over time. For example, a family spending 12,000 NIS a month with a set charge of 9,000 NIS adds about 3,000 NIS to the debt every month, plus interest. Within a year, the debt will reach 43,000 NIS.
Bank of Israel data shows that over 80% of customers maintain the set charge amount. Companies send notices with the option to adjust, but most customers continue in the same format. Credit activity has become a central component of the business for Isracard, Max, and CAL. The volume of consumer credit from credit card companies is estimated at over 30 billion NIS, of which 7-8 billion NIS comes from fixed charges.
Recently, Banking Supervision identified a gap between how the product was presented in marketing calls and its credit nature. The phrase "fixed charge" sometimes created the impression of a budget management service. Companies are now required to clarify that this is a credit offer, present the annual interest rate, and explain that the balance is carried over. Requirements have also been introduced to strengthen control over sales representatives and to contact customers whose debt remains high for a long period.
It is recommended to check your statement or app for phrases like "fixed charge," "revolving credit," or "interest-bearing balance." Compare these terms with a regular loan that has an end date. While a fixed charge is convenient, you pay 4% or more compared to a standard loan. The same applies to installments: the average interest rate on credit transactions is about 13.2%, which is 4-4.5% higher than loan rates. Ultimately, no one is financing your payments except you.
