In drive to eliminate cash, Bank of Israel buckles under on debit card fees

There’s a certain irony in the latest banking fee rule changes from the Bank of Israel. The central bank, along with the FinMin, have made cash transactions a target in an effort to get a grip on grey and black market transactions in everyday life. The irony is that in an attempt to encourage use of debit cards, the BoI is still allowing the big banks to discriminate against those customers who most need an electronic cash alternative.

shekelsIn rules issued today, Hapoalim, Leumi, Mizrahi, will be able to continue to collect card fees on debit cards when — get this — the customer does not hold a credit card from the bank. While the central bank says this is intended to encourage the distribution of debit cards among customers, “inter alia to serve as an alternative to cash payments”, it’s hard to see how those who don’t have a credit card aren’t punished.

While the BoI’s bank supervisors should be applauded for adopting measures that increase fairness and competitiveness in the banking system, the logic of this one escapes me.