Card processing fees for an Israeli business: what the fee is made of, the charges a quote hides, and how to compare providers
Card processing fees in Israel: the merchant rate and the interchange fee the Bank of Israel regulates, terminal and gateway fees, instalments, foreign cards, chargebacks, and negotiating.
Part of the guide: How to start an online store: the complete guide, with notes for Israel
Card processing fees are what a business pays on each card payment. The main one is the merchant discount rate: a percentage of each transaction that the acquirer (the company that pays you the money) charges. Inside it sits the interchange fee, the part the acquirer passes to the bank or company that issued the customer’s card, which the Bank of Israel regulates. Beyond that percentage there are other charges: a monthly fee for the terminal or for the online gateway, a per-transaction fee, surcharges on instalment payments and foreign cards, fees on refunds and chargebacks, and the cost of receiving your money early. To compare two offers you need to price every component on your own volume and mix of transactions, not compare the percentage alone.
How online payments work and who is involved is covered in payment gateways in Israel. Here we focus on the money: what you pay for, what is regulated and what is open to negotiation.
What the processing fee is made of
| Component | What it is | Who sets it | Negotiable? |
|---|---|---|---|
| Interchange fee | The part the acquirer passes to the card issuer on each transaction | Regulated by the Bank of Israel | No |
| Acquirer margin | What the acquirer keeps above interchange | The acquirer, in your agreement | Yes, mostly here |
| Merchant discount rate | The two together, as a percentage of each transaction | Your acquiring agreement | Yes, through the margin |
| Terminal or gateway fees | A monthly fee for the shop terminal or the online payment service, sometimes plus a per-transaction fee | The terminal or gateway provider | Yes |
| Surcharges | Instalments, foreign cards, refunds, chargebacks, early settlement | The acquirer and the gateway | Partly |
Interchange: the regulated part
The Bank of Israel declared interchange a supervised fee and in 2018 published a path to reduce it on deferred-debit card transactions from 0.7% to 0.5% of the transaction value, later bringing the path forward and setting a separate, lower path for immediate-debit cards. According to the same releases, in 2017 businesses paid an average processing fee of 0.98%, of which 0.7% was interchange. In practice, the regulated part is small, and the difference between acquirers’ offers lies mostly in their margin and the extra charges. Check the current rate on the Bank of Israel’s site.
The charges you do not see in the percentage
- Monthly fees. A terminal in the shop, or the online payment service (companies such as Tranzila, CardCom, Hyp or Grow connect a website to the acquirer). Some also charge a fixed fee per transaction, which mostly shows on small transactions.
- Instalments. Regular instalments, and credit instalments where the customer pays interest. Check whether each instalment carries a surcharge and when the money reaches you.
- Foreign cards. A transaction on a card issued abroad usually costs more. For a store selling abroad, this can be a large part of the cost.
- Refunds and chargebacks. A refund you initiate, and a chargeback when a customer disputes a transaction with their card company. Chargebacks usually carry an extra fee, even if the transaction is upheld.
- Early settlement. The acquirer pays out on a schedule. Getting the money sooner costs extra.
- Wallets and Bit. Apple Pay and Google Pay run on the customer’s card and are usually processed as a card transaction. Bit and other transfer services are a separate route, with their own terms through the gateway.
Online vs in a shop
A business that sells in a shop and online usually works with one acquirer through two channels: a terminal at the till, and a gateway that connects the website. Ask for one offer covering both, because combined volume gives you leverage. Online has two things a shop does not: card-not-present transactions, which carry more fraud risk and so use authentication such as 3-D Secure; and the gateway’s payment page, which you pay a subscription for. A Shopify store also pays a platform fee when it processes through an outside provider, as covered in Shopify in Hebrew.
How to compare two offers
Take a normal month and work out what you would pay under each offer. You need:
- Monthly card volume, and the number of transactions.
- How many transactions are instalments, and how many on foreign cards.
- How many refunds and chargebacks you had in the last year.
- Whether you need a shop terminal, online processing or both.
- When you need the money to arrive.
With these numbers each component turns into an amount in shekels, and you can see which offer is cheaper for you. An offer with a low percentage and a high monthly fee can be expensive for a small business and cheap for a large one.
What you can negotiate
- The acquirer’s margin. The biggest part open to negotiation. Higher volume and a steady history give leverage.
- Monthly and per-transaction fees at the gateway.
- Surcharges on instalments and foreign cards.
- Payout dates and the cost of early settlement.
- Commitment period and the cost of leaving.
Get offers from at least two acquirers, and review the agreement once a year as your volume changes.
Common mistakes
- Comparing the percentage only. Without monthly fees, per-transaction fees and surcharges, the comparison is wrong.
- Signing a long commitment without knowing what leaving costs.
- Not reading the monthly statement. It shows which fees were actually charged.
- Forgetting refunds. A store with many returns pays on each of them.
- Choosing a gateway before the platform. Not every gateway connects to every platform; see WordPress vs Webflow vs Shopify.
This is not financial advice. The exact terms are set by your agreements with the acquirer and the gateway.
Payments in the stores we build
At Libra we build stores and websites with payments connected, automatic invoicing and post-purchase email, described on websites, landing pages and stores. We are not a payment provider and take no commission from providers. The OVELLE store, a concept we built for a fictional jewellery house, shows the shopping bag and checkout. Send a brief with your platform, the kind of products and expected volume, and we reply by email with a direction, a written price and a date.
No term matches.
Questions
What is a normal card processing fee in Israel?
There is no single rate: the merchant rate is set in your agreement with the acquirer. According to the Bank of Israel, in 2017 businesses paid 0.98% on average, of which 0.7% was interchange, and the Bank has since reduced interchange along a published path. On top of the percentage there are monthly fees, per-transaction fees and surcharges.
What is the interchange fee?
The part of the processing fee the acquirer passes to the company that issued the customer’s card. The Bank of Israel regulates it, so it is not negotiable. What the acquirer charges on top of it is.
Which processing fees are there beyond the percentage?
Monthly fees for the terminal or online gateway, a fixed per-transaction fee, surcharges on instalments and foreign cards, fees on refunds and chargebacks, and the cost of early settlement.
How do I compare offers from payment providers?
Price a normal month: volume, number of transactions, instalments and foreign cards, and refunds. Turn each component of each offer into shekels and compare the total, not just the percentage.
Are online processing fees different from in-shop fees?
The acquirer’s fee can be similar, but online you also pay the gateway that connects the site and provides the payment page, and card-not-present transactions need authentication such as 3-D Secure. Ask for one offer covering both channels.
Getting started
Want this for your business?
Send a short brief: three required questions, the rest only if you like. We reply by email with a direction, a written price and a date.
