Current Account - General Information

​A current account is a crucial if not virtually indispensable banking service. For this reason, almost all adults countrywide have one. To obtain a current account, one has to sign an opening-of-account contract and choose the banking services that one wishes to receive in the account.
Different banks offer different terms for the opening of the account. Therefore, it is worth checking the terms that several banks offer and choosing the bank that offers the optimal terms and those best suited to the customer’s needs.

Are banks reqired to open a current account?

According to Section 2(a) of the Banking (Customer Service) Law,1981, a bank may not refuse unreasonably to open a current account in domestic currency, provided the account has a positive balance and the customer honors the terms of his or her account-management agreement with the bank.
Importantly, a bank is not required to extend credit to a customer, including a credit facility in the current account.

Reasonable grounds for refusal to open an account may include any of the following, among others:

• a previous dispute between the bank and customer that impairs the fiduciary relations that are needed for the management of a bank account;
• previous violent conduct—physical or verbal—by the customer at the bank;
• reasonable grounds to assume that the activity in the account will be related to money laundering;
• problematic activity in the account, e.g., depositing of forged checks that may create grounds for future lawsuit against the bank.

What should one look into when opening a current  account?

What instruments of payment is the bank willing to allow—checks, credit card, cash, withdrawal card?

• Is the bank willing to allow a credit facility in the account and, if so, under what terms—how large, at what interest rate, and with what charges?
• What charges will the bank impose for the management of the account? Are there any benefits or discounts, and how long will they be valid?

​Signatory rights in a joint account
“Collectively”—in such an account, every transaction requires the signatures of all members of the account;
“Singly and collectively”—an instruction from any member suffices for the consummation of any transaction; the other members’ approval is not needed.
The advantages of managing an account “singly and collectively” focus on the convenience and availability of the banking services for each member, who can transact in the account on his or her own. Members who choose this method must trust each other because each of them may credit and debit the account, i.e., deposit and withdraw funds, at any time without any other member’s consent.
“Collective” management of an account is advantageous in that it allows the members to supervise all transactions closely since nothing can be done without all members’ knowledge. This method is appropriate for members who wish to oversee activity in the account regularly so that nothing be done in the account without their prior approval.

How does a “collective” account become a “singly and collectively” account or vice versa? 

A “collective” account may be transformed into a “singly and collectively” account by joint instruction of all members.
In the case of a “singly and collectively” account, each member may instruct the banks to stop allowing any other member to transact in the account by him/herself. Once this instruction is given, any transaction will require the signatures of all members. It should be borne in mind that such instructions may paralyze activity in the account if the members do not cooperate.
Any instruction to the bank concerning the transformation of a “singly and collectively” account into a “collective” account should be issued in writing only. The idea here is to eliminate any doubt about the members’ wishes and to stop any action taken by other members as quickly as possible (if warranted).

Can a member of a joint account be deleted while the account is overdrawn?

A bank will rarely agree to do this until the entire overdraft is eliminated. This is because responsibility for the overdraft belongs to all members.

What is a "survivor clause"?

The “survivor clause” or the “long-life clause” is a clause in the opening-of-account agreement stating that after one of the members dies, another member may continue to operate the account. The clause pertains to the relationship between the members of the account and the bank; it does not transfer ownership of the funds to the surviving member. Its purpose is to prevent the “freezing” of the account after one of the members dies and to allow the surviving member to maintain routine and ongoing activity in the account until an order of inheritance or probate is issued. Were it not for the “survivor clause,” under inheritance law, the bank would have to obtain an order of inheritance or probate before it could allow the surviving partner to do anything in the account.

What’s the difference between someone who holds power of attorney in an account and a member of an account?

​What’s a credit facility?
A credit facility is a “framework,” created between the bank and the customer, for a continual series of future credit transactions in a current  account. The bank’s consent to creating the facility reflects its willingness to allow the customer to withdraw funds or debit the account in some other way, with the account showing a negative balance, up to the limit of the facility.
In return for this credit, the customer pays interest at a rate that he or she and the bank stipulate. Usually, interest rates for this credit exceed those applying to ordinary loans.

Must a bank extend credit to a customer?
​Section 2(a) of the Banking (Customer Service) Law, 1981, states that a bank is not required to extend credit to customers. The issue of any type of credit, as well as the collateral that the bank requires on this account, is at the bank’s discretion.

What are the bank’s obligations in managing a credit facility?
​The main directive that regulates the creation of credit facilities in the banking system is Proper Conduct of Banking Business Directive 325, “Management of Credit Facility in Current Account”. The purpose of the Directive is to prevent the protracted overdrawing of a credit facility. The Directive does not prohibit the existence of an overdraft and does not require that such an overdraft be reduced; it merely demands that a systematic credit facility be created in an explicit agreement between the bank and customer and that the agreement be implemented.
Who benefits from this? When banking activity is set within an explicit and consensual framework, the customer can be certain about what happens in his or her account, his or her ability to draw checks and make payments from the account in various ways, the interest rates that he or she is charged, and the cost of the activity in general.
Main provisions of the Directive:

• The credit facility agreement must be in writing.
• The bank must vet and document customers’ applications for credit facilities and tailor them to the customers’ needs and abilities.
• The bank may create a nonrecurrent credit facility for a customer who already has a credit facility, provided that it not charged the customer for creating the supplemental facility, that the interest rate in the supplemental facility not exceed that set in the most recent credit facility that was created by written consent with the customer, and that the bank advise the customer of the size and terms of the facility at approximately the time it is created.
• The bank shall not allow the credit facility to be overrun except in exceptional cases. Notwithstanding this, the bank may, at its discretion, honor checks and charges that create small overruns—up to NIS 1000—provided that these overruns be covered quickly.

May the limit of a credit facility be overrun?
​The rule:
A bank shall not honor any charges presented in the account that result in an overrun of the credit facility! Such charges, e.g., checks, standing orders, etc., shall be “bounced” for reason of insufficient funds.
Checks that are turned down due to insufficient funds shall be included in the count of “refused” checks (under the Checks without Cover Law), possibly resulting in the restriction of the account, with all the sanctions that this action involves.

The exceptions:
A credit facility in an account may be enlarged in several situations:

• The bank may, at its discretion, honor charges in small amounts—up to NIS 1000.
• The bank may create a nonrecurrent credit facility for the customer under the same terms as those of the existing one, without charging the customer a fee for doing this and without imposing a higher interest rate than that applying to the existing facility.
• If the customer has asked the bank to honor a charge that is about to reach his or her account, the bank may choose to accede.

How does one settle an overdraft?
​There are several possible ways:

• Increasing the credit facility—this depends on the bank’s consent, the customer’s financial condition, and the collateral that the customer gave the bank.
• Taking a bank loan—as a rule, the interest on such a loan will be far below that on an overrun of the facility; by doing it this way, one can reduce one’s interest payments and even pay off the credit in installments. Obtaining such a loan depends on the lender’s consent. The recommended way is to negotiate with the bank where your account is kept, with other banks, and with the credit card companies, and carefully compare the terms, the interest rates, and the charges that apply to each loan.
• Reducing current expenditure—if you overrun the credit facility on a protracted basis, and especially if the overrun steadily increases, it means that you are overspending your income and evidently living beyond your means. This situation may lead you into financial entanglements.
• Depositing funds from some other source.

How does one manage an account to avoid overrunning the facility?

• It is recommended not to maintain a negative balance on a regular basis. A credit facility is meant to allow temporary flexibility only. It is not a good source of credit because it is the most expensive source that the banking system provides. A regular overrun may also be indicative of a lifestyle that is incongruous with your income.
• Keep regular records of expenses charged to your account and plan them and their timing accordingly. Keep track of the balance of your account and your regular expenses. Obtain information about your account in the various ways that the bank provides: telephone services, information services and automatic machines, and online services.
• Don’t manage your account in such a way that the balances verges on the limit of the approved facility. This forces you to keep the debits and credits in the account under painstaking and close supervision. In the case of some charges (e.g., checks), you don’t necessarily know the exact date on which your account will be debited; this makes it hard to keep track of your account. Accordingly, it is recommended that you leave a “safety margin” between your actual balance and the limit of your credit facility.
• As you monitor the balance, also be mindful of deferred payments that will have to be made from the account. Be especially attentive to checks that you drew on the account and have not yet been presented for payment, as well as deferred credit-card payments on account of past transactions.
• Adjust the expenses that you charge to the account to your income. An increase in the use of credit facilities and loans may indicate that you are living beyond your means; sometimes it may even lead you into financial entanglements.

How can I handle temporary difficulties and avoid the “bouncing” of charges?
​You can negotiate with your bank to temporarily increase our credit facility so that the charges will be honored. The aforementioned directive from the Supervisor of Banks allows a bank to increase the facility temporarily with both sides’ consent.
You should do this as early as possible. Sit down your bank and tell it about the temporary difficulty so that you and the bank can work out a mutually agreeable solution.

Whom should I contact to locate a bank account?
The Bank of Israel does not have a central database on Israel residents’ accounts with all the banks, including those of customers who have died. Every bank has a database that contains information about its customers’ accounts at all branches. Therefore, if you’re interested in obtaining information about accounts kept with any particular bank, you must approach the bank directly.

For a list of up-to-date addresses of the banks’ headquarters

Whom should I contact for information about an attachment order or a bankruptcy order?

​You cannot approach the Bank of Israel for information about the implementation of various orders (attachment, bankruptcy, custodianship, etc.)
Information about the existence or cancellation of attachment orders is forwarded directly by the party that imposed the attachment (the Bailiff’s Service or the court) to the banks’ headquarters. The Ministry of Justice reports to banks about orders issued in bankruptcy proceedings.
Banks must provide their customers with basic information about orders that they receive in regard to their accounts. Where necessary, banks must refer customers to the offices of the Bailiff’s Service, the courts, or the Ministry of Justice, as the case may be, for further information.