Tuesday, 9 December 2014

Tashlumim (Installment Payments) in Israel: Friend or Foe?

While owing a credit card can be of assistance to many - when used correctly, they can become a source of tremendous problems when used incorrectly. Not all countries are equal however...

While all countries will allow you to debit your card with a payment when you wish to purchase something, a country like Israel has an additional credit option over and above this regular facility.

Let's get this clear from the beginning - anyone using a card irresponsibly will find himself in serious trouble within just one month. It's not the plastic that makes the purchase. It's the money in the account that comes off the account when the credit card is due for payment - something many forget! Of course if you find yourself in need of carrying this piece of plastic with you because for any number of reasons, carrying another payment type (cash or cheque) is uncomfortable, but actually do have the money in your account, then your credit card can assist you when you find you just don't have the cash on you. Purchasing items on the Internet (responsibly) can be done using your card. Not having the card may mean you lose out on a book you may be able to obtain from overseas (or any other item you may need at the time.) But again, if you forget that - while the payment goes through, it has not actually gone through until some other date during the month when the bank account is actually debited - avoid this piece of plastic in every way you can!

In Israel, there's an additional payment method made to "help" you when money is tight. It's called "Tashlumim" (תשלומים). The word Tashlum means payment, though the correct translation in this case would be "installment". In other words, you go to the sports store and notice a wonderful fitness machine that you simply must have! It will set you back ₪4000 - but when it comes to being fit - it's worth it (you say to yourself!) You ask the store owner (perhaps) if he can give you a discount. He replies that he cannot, but not to worry, you can purchase the item in Tashlumim. In fact, you probably won't even feel the money being paid - he may convince you. He tells you that in Israel you can often get up to 24 months of Tashlumim - so your ₪4000 super-powered aerboic swimming/cycling/flying machine will cost you just ₪167.67 per month. Now isn't that affordable - he asks? He's convinced you. Your account has convinced you. Your card has convinced you and you go ahead and make the purchase. The item is delivered and for a week (for a start) you're a fitness freak! Slowly it starts to settle in though that though the item is in your home - you still have another 23 payments to make.

The salesman will also convince you that your Tashlumim are free. What's "great" about this Tashlum business is that you'll be sure to meet another Tashlum fanatic at your next grocery purchase. You'll meet another one selling your electricity. Another selling you some other widget-gadget and so it goes on. Each of these salesman will also convince you that purchasing through Tashlumim is the way to go! In fact, when you check out from the superstore, you may encounter a smiling teller ask you "Tashlumim or Ragil"? He's asking if you want the payment to be made over a series of months or if it should come off in one go. In fact, the way he says it clearly points to Tashlumim being the way to go. You may even choose it!

Fine! So you have your super-aerobic machine now on Tashlumim, and you've even bought your groceries on Tashlumim. You've paid for you electricity on Tashlumim and a whole bunch of other things which all seemed to be just ₪150 every month. But you've forgotten the biggest thing. After ten such purchases - that month alone - you'll be obligating yourself for ₪1500 a month for 24 months! But that's not all, because once the next month comes around, you'll find yourself doing the same thing. You'll now be adding your original ten Tashlumim with another 10! Before long, you'll find yourself in tremdendous debt - making use of a completely "useful" and "helpful" Israeli payment system. Essentially, you've now turned your credit card into a doubled-credit card! It seems like you can get more out of it. But you can't.

What's more - the point they never tell you - you'll be paying a fee of around 50 aggarot per "pushed off" installment payment. In other words, if you "sign up" for the ten Tashlumim offer, you'll be forking out another 5 Shekel each month for the hidden costs of those payments. It never sounds like much when you think of "just" ₪5, but that's the point they all want you to think - until of course you realise just how much these "small" amounts add up to!

There is only one way to get a hold on these things once you realise what is happening. Avoid this form of payment wherever you can. It should clearly only be used by a responsible person in a very responsible and needed urgent situation. Relying on it - just because it seems to be the done thing, with everyone offering it can be the start of tremendous financial problems. 

Think of it this way... Instead of the ten Tashlum each month that cost ₪1500, see if you can purchase a super powered aerobic swimming/cycling/flying machine at that price outright and buying it straight out if you can. This way you'll have a great working machine that will be yours from the start - and not having to worry about the payments every single month. Likewise - consider managing all your purchases in this way. As each month goes by - rather put the money you would be putting into Tashlumim - into one item that you know you can pay for right away. If you can't - consider very well the real cost and time involved when making that Tashlum purchase!

Credit card debt is so easy to get into. In Israel, there's just one more way for helping you get into it even faster. Tashlumim. Be aware of what it is, and what it can actually end up costing you in the long run!

For more assistance on understanding some of the lifestyle in Israel and how you can get a better grasp of succeeding to live here, do contact us for a one on one life skills consultation.

** This post is offered to provide information to help the reader consider the points discussed for his own situation in order to help make an informed decision for himself. For professional financial or other advice, always contact someone you feel is best suited to assist you.

1 comment:

  1. There's also Tashlumim where the vendor charges ribit on the installments. The bank charges the 0.50 NIS per month fee regardless, but the vendor charges a higher monthly rate if you pay in payments or over a certain amount of payments. (i.e. 1-6 payments, no interest, more than 6, they'll charge a higher fee which is ribit. Many of these vendors don't have a heter iksa either so people end of transgressing the Torah prohibition or paying ribit.

    Then there is a "credit" facility on the card. Instead of the vendor charging you interest, they receive the full amount upfront on their merchant account they pass the loan over to the card issuing bank. These banks always charge interest typically at 8-12% APR on the loan (at least they usually have a heter iksa) and will typically allow up to 18 payments

    You can also buy on the internet in one payment, call the card issuer (at least (isracard/mastercard lets you do this) and they will transfer the amount over to credit dividing the loan up to 18 payments and telling you how much ribit is.



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