For this blog post, I wanted to bring to your attention something we feel the average consumer may not understand completely regarding their options for changing money. It is very important for any business to be absolutely clear about their fees and we want to make sure that you, the clients, have the right information so you can ask the right questions.
There are generally three ways people convert and transfer money in(to) Israel: exchanging cash, writing checks, and wiring money.
Cash is the most simple of the three. Bring the cash to your local money changer and get Shekels. The odds are you are not going to be ripped off. You will most likely get a good enough rate that searching around for a better rate for your pocket money is not going to do much good. There are no other fees from a money changer for converting cash – only the exchange rate.
Verdict: Change your cash at a local money changer you trust so you get a good enough rate.
This method of changing money has been (and may still be) the most popular for Anglos in Israel until recently. Cashing checks is especially helpful for those changing relatively smaller amounts of money (up to $10,000) as they get the Shekels in cash on the spot. It also makes sending money to a third party easier as the person cashing the check does not need to actually have a bank account, he simply needs to sign the check and get the cash.
However, recently, since the beginning of October, there was an issue with a US credit union which caused money changers in Israel to stop accepting US checks. Since that time, numerous money changers have said they will start to accept open checks (a check without a name – allowing them to add a name of their choosing, in essence, their clearing firm) usually between 3%-5%.
So, how are you charged for cashing checks? You are actually charged twice for checks: Once for the cashing fee and once on the exchange rate.
We get a lot of clients that come in and tell us, we get charged 1.5%-2% (this is based on current rates). To that we reply, “And what exchange rate do you get?” Some clients happen to know this and will say 2-3 agurot or a similar percentage rate. For those that are not clear on this subject, simply put, a money changer charges 2-4% (maybe more) at best for cashing checks on a good day, when they have no issue with clearing the checks.
Verdict: Cashing checks at minimum will cost you at least 2% in total costs. The only advantage – you will get your cash right away. However, make sure you know who the money changer is using to clear the checks, especially if they are asking for an open check.
A wire transfer is the most obvious way to transfer money for those who just want their money to get to their accounts with no complications. However, normal wire transfers that clients send from their overseas account to their Israeli account can take up to 5 business days. On top of that, banks in Israel will charge you a small fee to receive the money, another to convert the money, and then give you a poor exchange rate when converting.
So how can you make fast, reliable wire transfers and still get good rates? Using a foreign exchange broker!
(Disclosure: We are one such broker.) It will only take 48 hours to have your Shekels and you save on the exchange rate as well as the Israeli bank fees.
Verdict: Wire transfers can take 3-5 business days, and cost more than check cashing, if you send the money directly through them. If you use a broker, such as IsraTransfer, you can have the money within 2 business days with no fees and at a better exchange rate than the bank.
A New Frontier: Free Online Transfers (from the US)
Wire transfers don’t have to be costly, and you can still make transfers for less than it costs to cash a check. Don’t believe me? Our new SmartPay Israel™ online system has no international wire fee from the US. Here is an example of what it would cost to cash a check versus wire money online through IsraTransfer:
Let’s say you are looking to convert $5000. With a check at a money changer, and at a rate of 3.5, you will leave with cash of approximately 17,170 Shekels. With IsraTransfer’s SmartPay Israel, the same client will come out with 17,280 Shekels – a savings of more than 100 Shekels – and you don’t even have to leave your house to do it!
So, within the various transfer and conversion methods, each person first needs to decide what they need, when they need it, and what works best for them. Clearly, checks are not the best method to use anymore for anyone with a bank account overseas.