When buying a ticket online from El Al in Israel, the fares are quoted in USD, but the final payment screen allows you to choose whether to pay in USD or ILS. At the bottom of the page is the following:

If you choose to pay in shekels and are paying by means of a credit card that was issued in Israel, the final amount, which appears in US dollars, will be converted to shekels based on the high exchange rate for bank transfers and checks on the day of payment.

The equivalent notice when viewing the site in Hebrew is:

במידה שבחרתם תשלום בש"ח והנכם משלמים באמצעות כרטיס אשראי שהונפק בישראל המחיר הסופי, שמופיע בדולר US, יומר לשקלים ע"פ שער העברות והמחאות גבוה, הידוע ביום התשלום

What is the "high exchange rate for bank transfers and checks" that is used for the conversion? In particular, how does it compare, either to the mid-market rate or to the rate that would typically be charged by a bank in Israel if the charge were processed in USD?

Furthermore, the notice leaves open the question of what happens if you choose to pay in shekels with a credit card issued outside of Israel (though I realize that would be a silly thing to do).

  • Why is there no tag for NIS/ILS/Israeli-shekel? – Ari Brodsky Nov 25 '15 at 14:40
  • added a tag for you – MD-Tech Nov 25 '15 at 14:46
  • Check what rate your credit card uses, some use official rates with very small mark up, especially corporate cards - if you have one. Will probably be cheaper to charge in the original currency and have the card convert. – littleadv Nov 25 '15 at 17:35

The rate for "checks and transfers" is set by each bank multiple times during the day based on the market. It is as opposed to the rate for "cash/banknotes", also set by each bank, and the "representative rate" (שער היציג) set by the Bank of Israel. These rates can be found on the websites of most banks. Here is Bank Hapoalim and Bank Leumi.

The question is which bank's rate will be used. It might be the bank that issued your card, El Al's bank, or the credit card company (ie Poalim for Isracard or Leumi for CAL). You will need to call El Al to verify, but since these are market rates, they shouldn't be too different.

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In older days the merchants and their merchant banks[or service providers] would take funds in their currency. Say in this case USD. When the charge hits the issuer bank, the merchant and merchant bank gets there USD and were happy. The user would get charged in local currency Shekel in this case. The rate applied by his bank [and card provider, Visa/Master also take a cut] is the standard shelf rate to individuals.

When business growing and banking becoming more sophisticated, lots of Merchant Banks and Merchants have created a new business, if you offer Shekel to all users then you have lots of Shekel that you can convert into USD. So in this model, the Merchant makes some more profit from Fx spread, the Merchant Bank makes good money in Fx. Your Bank [and card network] loose out. You stand to gain because you potentially get a better rate.

All this theory is good. But the rates are moving and its quite difficult to find out if the rates offered directly by EI AI would be better than those offered by your bank.

I have no experience in this example, but I have tried this with large shops, buy 2 items one charge in GBP and other in local currency around 2-3 times spread over a year. The difference in rate was close to identical, at times better or worse in range of .02%

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  • My experience is the opposite. Never had I had a case where the merchant rate was better than the credit card. – littleadv Nov 25 '15 at 17:39
  • @littleadv Interesting. Could it be because of stricter regulations in US over Fx mark-up. I vaguely remember the card companies were made to pay a fine on excessive mark-ups on Fx quite sometime back. Or is it more because of market competition. – Dheer Nov 26 '15 at 3:46
  • I'm more inclined to blame the competition. Some cards are much better for international travel than others - and they get all of my business when I travel. – littleadv Nov 26 '15 at 6:03
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    It has been like night and day to use a US credit card for foreign exchange since the 2006 class action settlement: ccfsettlement.com/home – user662852 Nov 26 '15 at 6:45

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