Savings account rates remain firm despite BoI cut

At the beginning of the month, the Bank of Israel Money Committee surprised the economy by cutting the interest rate 0.25% for the second consecutive time to 4%. The reduction is expected to affect the interest rate paid by savings accounts to the public. But the emergence of competition in the banking system is creating alternatives to the traditional deposit.

Economists see the Bank of Israel rate falling to 3.25%-3.5% by the end of 2026, so it is worth locking funds in savings accounts to take advantage of the relatively high interest rates that can be obtained today. “Globes” examined the solid savings options offered by the various alternatives, and how much can be earned from savings accounts.

The banking system is set to implement a series of changes in the structure of competition, and new alternatives will be available in the next few years. In the coming weeks, the Esh digital bank will open, offering deposits to the public as well as a revenue share model, in which each customer receives a certain share of the bank’s profits. In addition, entities are expected to enter the arena that will receive a license to operate a ‘small’ bank that will offer deposits to the public.

Today, a huge sum of about NIS 230 billion is lying in the public’s checking accounts at banks in Israel, eroded by inflation and generally not receiving any interest. Following ongoing public criticism of this, more alternatives for that money (apart from traditional bank deposits) have become available. The Bit payment app offers an interest rate of 4% per year on a balance of up to NIS 20,000, while its rival Paybox will begin paying an annual interest rate of 6% on such a balance next month, but under certain conditions.

A person who locks their money in a bank deposit for a period of six months to a year should receive, according to data from the Bank of Israel website as of December (before the latest rate cut), an average annual interest rate of 4.17%. This is an unexpected improvement compared with January 2025, when the average interest rate on these deposits was 4.02%. The reason is that the banks have increased competition Among them is the level of interest on deposits, so that no erosion occurs. This despite the cut in interest rates in Israel, which was 4.5% a year ago. However, the trend will not persist for long if interest rates continue to fall.

As of December 2025, before the latest interest rate cut, the range of interest rates that could be received was relatively wide, ranging from an average annual interest rate (shekel) of 3.56% (at Massad Bank) to 5.46% (at the digital bank One Zero). At the two largest banks – Leumi and Hapoalim, the average interest rate on such deposits was 4.21% and 4.43%, respectively.

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Banks are of course far from being “suckers”, and if customers try to lock in the interest rate for a longer period, they receive lower interest rates. Thus, on deposits for 3 to 5 years, the average interest rate is 3.41%. Here too, the range is wide, ranging from 1.92% at Discount Bank to 4.16% at Yahav Bank.

Money market fund or Makam

But not just the banks. Since interest rate hikes began in 2022, money market mutual funds have become a hit among savers, and they already manage about NIS 180 billion. These are marketable funds (an advantage over bank deposits) that offer interest rates that try to match those of bank deposits.

The fund can invest in a variety of solid channels such as bank deposits, Makams (short-term loans) from the Bank of Israel, commercial paper (NAM) rated A1 or higher (up to 25% of the portfolio) and government bonds, with the average life of the assets held not exceeding three months to maturity. Last year, money markets yielded an average return of 4.4%, but given that interest rates are on a downward path, it is not certain that the numbers in 2026 and beyond will be the same as last year.

Despite the possible erosion of interest that the money funds will generate, they are preferable to leaving the money in the savings account. Earlier this month, Fair, which runs a digital platform for trading mutual funds, launched a mechanism that allows the public to receive some return on money that is simply “lying” in the bank. Fair proposes setting a lower limit for the money that must remain in the savings account, and anything above it is deposited into a pre-selected financial fund. As soon as the system detects that the balance meets the set limit, an alert is sent on WhatsApp, and if approved, the money flows into the financial fund.

Another traditional way to close the money in a solid channel is through a Makam, a short-term security issued by the Bank of Israel, which is essentially a bond (at a discount) for a period of up to one year. A Makam until January 2027 currently offers an interest rate of 3.6%, so it contains at least one interest rate cut for the period. There are bank deposits that offer better interest rates than it, but it is liquid, and it can be bought or sold every day TASE is open (Monday-Friday).

The credit card companies are getting ready

Israel Discount Bank’s Paybox payment app recently said that from early February, it will offer interest on balances (up to NIS 20,000) at a rate of 6% per year, but only to those who spend more than NIS 2,000 per month on its Paybox credit card.

Paybox boasted, “This is the highest interest rate currently available on the market, while the money here remains liquid.” In other words, you don’t have to close the deposit for any period, but you do have to commit to activity on the credit card. On the other hand, Paybox cut the interest on balances for those who do not meet the condition in question to just 1% (instead of an interest rate of 2.5% prior to the expected update). The move, it said, “is intended to maintain a competitive value proposition in the form of a high interest rate, and to allow customers to enjoy attractive terms even in a variable interest rate environment.”

Rival payment app Bit, owned by Bank Hapoalim, last November offered a fixed annual interest rate of 4% to those who close their money in a deposit for a period of 3 months. After the money is released, it can be closed again. Here too, the amount is limited (according to regulatory provisions) to NIS 20,000 per year, and there is the option of closing it in “pockets,” – small accounts for pre-defined purposes.

Another player that has entered the savings deposit sector is Clal Insurance’s Max credit company, which since November has been offering an “accumulate and return” account, which is supposed to be reminiscent of a traditional current account. Savers can deposit up to NIS 500,000 and receive an interest rate of 3% per year. Cash can be withdrawn from this account and also charged to monthly credit card expenses.

Market estimates are that the competing credit card company, Isracard, whose new controlling shareholder, the Delek Group, is seeking to increase competition in the financial sector in the economy, will be one of the first entities to take up the challenge to establish a ‘small’ bank. These are entities that will be allowed to compete not only for providing loans, but also for deposits.

The government recently introduced legislation that will allow the establishment of such banks through the Economic Arrangements Law. As the budget is passed, the conclusions of the committee headed by the Supervisor of Banks, Daniel Hahiashvili, and other senior officials, will be approved and translated into the possibility of granting a license to establish small banks. (whose assets amount to up to NIS 50 billion). Along with credit card companies, insurance companies may also consider applying for such licenses, as well as foreign investment enterprises.

Published by Globes, Israel business news – en.globes.co.il – on January 22, 2026.

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