Mad Hon · Debt to income

Clear the card balance faster

Clear the card balance faster. A step-by-step Mad Hon guide for your Debt to income score, written for olim.

1. Find out which arrangement the card is on.
An Israeli credit card normally clears its whole balance from your current account on one fixed day each month, so there is nothing to roll and no interest to pay. A balance that carries from month to month means the card was moved onto a revolving credit arrangement, often called kredit, at some point. Ask the issuer which arrangement you are on and ask what it costs. Moving back is usually a phone call, and it is the single change that stops the meter.
2. Look for the other half of the same debt.
Israeli current accounts come with an overdraft facility attached, the misgeret ashrai. When the monthly card debit empties the account, the shortfall becomes overdraft priced by the bank rather than by the card issuer, and the balance shown in the banking app can include the facility, so the number on the front screen is not money you hold. Ask the bank for your facility limit in writing, then list the card balance and the overdraft together.
3. Rank every balance by its effective annual rate.
The comparable number is the effective annual rate, ribit shnatit metu'emet, which folds in fees rather than quoting interest alone. Israeli lenders have to disclose it. The Fair Credit Law also caps what any lender may charge an individual at the Bank of Israel rate plus fifteen percentage points, and plus twenty for a loan of up to three months, and the cap is measured on that effective rate with fees included. A quoted headline rate that looks fine can sit against a very different real one.
4. Price a cheaper facility against what you hold.
A bank loan taken specifically to clear the balance, or a loan drawn against a keren hishtalmut or provident fund and secured on your own savings, is usually cheaper than card credit. Get at least two written offers, compare effective rate against effective rate rather than headline against headline, and ask what early repayment would cost. Where an issuer offers a promotional rate to move a balance across, ask how many months it runs and what it reverts to.
5. Stop adding to it while you clear it.
An immediate-debit card takes the money the same day and cannot roll anything, which is how most Israeli cards already behave. Freeze the credit card in the issuer app for the duration. Watch tashlumim in particular: splitting a purchase into instalments at the till commits the card for months after the purchase, so a card that looks idle can still be filling up.
6. Automate the extra payment on payday.
Every shekel above the minimum lands on the principal, which is what shortens the run rather than just servicing it. Set a hora'at keva for the payment, dated to the day the salary arrives, so the money is committed before the month starts spending it. Raise it whenever a subscription is cancelled or a rise lands.

Clear the card balance faster. A step-by-step Mad Hon guide for your Debt to income score, written for olim.

1. Find out which arrangement the card is on.

An Israeli credit card normally clears its whole balance from your current account on one fixed day each month, so there is nothing to roll and no interest to pay. A balance that carries from month to month means the card was moved onto a revolving credit arrangement, often called kredit, at some point. Ask the issuer which arrangement you are on and ask what it costs. Moving back is usually a phone call, and it is the single change that stops the meter.

2. Look for the other half of the same debt.

Israeli current accounts come with an overdraft facility attached, the misgeret ashrai. When the monthly card debit empties the account, the shortfall becomes overdraft priced by the bank rather than by the card issuer, and the balance shown in the banking app can include the facility, so the number on the front screen is not money you hold. Ask the bank for your facility limit in writing, then list the card balance and the overdraft together.

3. Rank every balance by its effective annual rate.

The comparable number is the effective annual rate, ribit shnatit metu'emet, which folds in fees rather than quoting interest alone. Israeli lenders have to disclose it. The Fair Credit Law also caps what any lender may charge an individual at the Bank of Israel rate plus fifteen percentage points, and plus twenty for a loan of up to three months, and the cap is measured on that effective rate with fees included. A quoted headline rate that looks fine can sit against a very different real one.

4. Price a cheaper facility against what you hold.

A bank loan taken specifically to clear the balance, or a loan drawn against a keren hishtalmut or provident fund and secured on your own savings, is usually cheaper than card credit. Get at least two written offers, compare effective rate against effective rate rather than headline against headline, and ask what early repayment would cost. Where an issuer offers a promotional rate to move a balance across, ask how many months it runs and what it reverts to.

5. Stop adding to it while you clear it.

An immediate-debit card takes the money the same day and cannot roll anything, which is how most Israeli cards already behave. Freeze the credit card in the issuer app for the duration. Watch tashlumim in particular: splitting a purchase into instalments at the till commits the card for months after the purchase, so a card that looks idle can still be filling up.

6. Automate the extra payment on payday.

Every shekel above the minimum lands on the principal, which is what shortens the run rather than just servicing it. Set a hora'at keva for the payment, dated to the day the salary arrives, so the money is committed before the month starts spending it. Raise it whenever a subscription is cancelled or a rise lands.