If you are making transfers frequently between banks in the UK, you have a few options available to you. CHAPS and BACS payments are among the most common for higher value transactions, but what are they and how long do they take to clear in the payee’s bank account? This article will look at the following points when it comes to CHAPS and BACS payments:
- What is a CHAPS payment and how long does it take?
- What is a BACS transfer and how long does it take?
- Which is faster?
- Which is cheaper?
- What you will need to make payment
- Other types of payment
What is a CHAPS payment and how long does it take?
CHAPS is short for the Clearing House Automated Payment System. It’s a same-day bank transfer system for high-value transactions in Pounds Sterling. Payments via CHAPS must be over £10,000, but there is no upper limit to the amount you can send with this method.
CHAPS is usually used for large, infrequent or one-off payments because there is a charge attached. It will cost between £20-35 to send a CHAPS transfer, depending on your bank.
A CHAPS transfer will be in the receiving bank on the same day as you send it, usually appearing within a couple of hours. To ensure it’s a same-day payment, you must send the CHAPS before 3pm, but the receiving bank will be able to tell you what their cut-off time is for same-day transfers. CHAPS money can sometimes still be received on the same day if it is sent after this deadline, but for larger sums, it is better to be safe than miss a cut-off.
Because of the fast and secure nature of sending a CHAPS payment, it is the payment of choice when it comes to paying large bills for both individuals and companies. For example, property purchases or securing large business assets that are time-sensitive and must be paid by a specific date.
What is a BACS transfer and how long does it take?
BACS is short for the Bankers’ Automated Clearing Services, and is the method of payment used in all Direct Debit transactions. It is mostly used for lower-value and frequent transfers, as it is low cost. However, it does have an upper limit of £250,000 for a transfer, unlike CHAPS.
Businesses can use BACS to pay wages, suppliers, or contracts because it can be set up to pay out regularly.
Once a BACS payment is sent, it will take three working days to clear in the receiving account. This means that BACS may not be the best option for time-sensitive transactions. The process goes as follows:
- Day 1: Payments are submitted to BACS
- Day 2: Payment is processed by the sending bank
- Day 3: Payment is taken from the sender and received by the recipient account.
Which is faster?
CHAPS is the faster option, with BACS payments taking longer. For any urgent payments, CHAPS would be the best method, since you are guaranteed same-day payment as long as you make the transaction early in the day, ideally between 6am and 3pm. BACS is slower at three working days, but may be the best option for more frequent or regular payments if you don’t have any time constraints.
Which is cheaper?
BACS is the cheaper option as there are virtually no charges, compared to the standard £20 you’ll pay for a CHAPS. And if there are charges with BACS, they are usually very small (under £1). CHAPS, however, is free to receive, so if you are requesting a CHAPS payment, you’ll receive it the same day with no charge to your own account.
What you will need to make payment
To make a BACS or CHAPS payment, you will need the following details for the payee account:
- Sort code
- Account number
- Name on account
- The name of the bank
Many banks now allow you to make CHAPS payments via your internet banking or app, so you may also need a card reader if doing it digitally, for security purposes.
Other types of payment
Another option for transactions that are not of large value is to use the Faster Payments service.
A Faster Payment is an electronic transfer between UK banks that happens within 2 hours, but usually immediately. This is the service you’ll have used if you’ve ever used your online banking or phone app to send your friend any money you owe them.
It is possible to make Faster Payments up to the value of £250,000, but every bank has its own limit on the maximum you can send via online banking, over the phone or in a branch.
If you are able to, and your payee agrees, it might be more convenient to send a few Faster Payments instead of a lump sum. For example, four separate Faster Payments, each for £10,000, will arrive almost instantly and this may be quicker to manage than one CHAPS transfer with charges.
However, sending large amounts as Faster Payments too often from a personal bank account may cause you to be flagged for review for money laundering – and you may need to complete ensuing security checks with your bank.
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