What is the best way to exchange money when traveling from America to Israel

I'm from America and I'm going away to Israel for over a month in the next couple of weeks on birthright. I will not be spending a lot, but definitely enough for a hotel room for 20 plus days, not to mention food, and maybe souvenirs. I was wondering if anybody has any opinions on how I should go about spending money there. Would it be ideal to use a credit card, if so I heard Capital one does not charge you a foreign transaction fee? I was told that using a credit card gets you the most accurate and up to date exchange rate.
Otherwise would it be best to consider using cash, and exchanging it at the airport either in Israel or America for Sheckels?
I have several credit cards American express, discover, visa, citi. Which would give me the most value and practicality there?
My other question was a cell phone, Birthright is giving me calling within the boarders of Israel for free. But I do have the ability to call abroad for a price. I was thinking if I just have 3g on my phone, I will be able to use a free text app. I have an I-Phone. I was told that I will need an unlocked phone, what might that mean exactly, I was under the impression that if it were unlocked you can just download free stuff, otherwise what would the best way to go about unlocking the phone in order to be able to have it working there. If I choose not to pay for the 3g will my iphone work if the hotels have Wi-Fi?

I know I have asked a broad range of questions but any information you can help me out with from your own experiences would be awesome.

Don't use only a credit card and always keep some emergency cash around you in case you wi lose your wallet and keep always a copy of your passport so you won't lose it

Credit cards are the most convenient, but give you a very bad exchange rates.
You should also take cash and exchange in exchange places in the street, who give the best rates.
Don't use the ones at the airport or in banks.

Visa is the most accepted in Israel. Mastercard is also OK.

Your iphone need to be unlocked ("jailbreak") in order to download non sanctioned apps - this has nothing to do with using in Israel. You can unlock the phone and download the app in the US as well. If you don't find a place in US to do it, most phone stores in Israel can unlock your iphone. Once unlocked, you can also put an Israeli SIM into is, and make direct calls much cheaper inside Israel and to US. Golan is the recommended phone company for voice and international. Hot Mobile is the best for web and app data access.

I use my credit card to get shkalim from the ATMs, but yes, there's a charge.

My understanding is that it's cheaper to book your hotel and other big expenses from the USA - less tax that way.

I've NO clue about most of your question because I've just always dreamed about going to Israel and I hope my son will go in the next couple of years when he is old enough via Birthright so I pay attention to questions asking about this. I'm responding to churro. The only thing I'm concerned with regarding his answer is this part "You should also take cash and exchange in exchange places in the street, who give the best rates.
Don't use the ones at the airport or in banks" I've recently been watching the TV program "Scam City" that shows this fellow traveling around the world and the different scams common in different cities across the world.

On a couple of the shows he advises to NOT use the currency exchange places in the streets UNLESS you are very familiar with the current legal exchange rate as they are far more likely to screw you over on the currency rate than the banks.So, perhaps you can find some more specific information such as thename of the best place to go to for currency exchange and find out before you walk in exactly what that rate is.

Is there an "app" you could download to help you make sure you're not being taken advantage of with regard to the exchange rates? And did churro mean that you must download a program/app onto your phone in order to use it in Israel? I didn't know I phones had SIM cards to change?
( shows how ignorant I'm)