In the fast-moving business world, your business needs to be able to make quick payments in the most efficient way possible. You may have come across the term CHAPS in your financial activities, in your personal life, or in doing business. So what is a CHAPS payment, and how does it work? This article will be a guide on all things CHAPS, and we’ll dive into the following areas:

  • What is a CHAPS payment?
  • When would you use a CHAPS payment?
  • What information do you need to make a CHAPS payment?
  • How to make a CHAPS payment?
  • How long does a CHAPS payment take?

What is a CHAPS payment?

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. 

More than 30 banks are part of the CHAPS payment system, but more than 5,000 financial institutions are able to make and accept CHAPS payments. You can see the participants of the CHAPS system on the Bank of England website here.

Payments via CHAPS must be over £10,000, but there is no upper limit to the amount you can send with this method. 

When would you use a CHAPS payment?

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. 

Because of the fast and secure nature of sending a CHAPS payment, it is the preferred payment method when it comes to paying large invoices or for big purchases (for both individuals and companies). For example, solicitors usually request property purchases to be sent via CHAPS because of the security and guaranteed time frame. CHAPS would also likely be used (or requested) for any payments for significant assets or for time-sensitive payments that must be due by a specific date.

Some other examples of when CHAPS are used are:

  • Financial institutions and global businesses use CHAPS to settle money market and foreign exchange transactions.
  • Corporate firms might use CHAPS for high value and time-sensitive payments, such as paying their suppliers or for payment of taxes (if they want to ensure it arrives on a certain date).
  • Solicitors and conveyancers commonly use CHAPS to complete transactions for the transfer of other types of high-value property (such as art or business assets) as well as housing property.
  • Individuals may use CHAPS to buy high-value items such as a car or pay a deposit for a house.

What information do you need to make a CHAPS payment?

To make a CHAPS payment, you will need the following details for the account of the person or business you will be paying:

  • Sort code
  • Account number
  • Full name (or names) on the account
  • The name of the bank
  • Address of the bank

If you have requested money to be sent to you via CHAPS, you should give the above details to the individual or business that is trying to pay you. If you do not give them all this information, they may encounter difficulty in making the payment without all the relevant details, and there could be a delay in your receiving the money.

How to make a CHAPS payment?

Many banks now allow you to make CHAPS payments via your internet banking or mobile app, so you may also need a card reader if doing it digitally for security purposes.

If you try and the amount is too large to manage online or on the phone, then you can go into a branch with identification to make the payment in person. 

There may also be other options for making the payment that might be better than CHAPS (depending on the circumstances).

A Faster Payment is an electronic transfer between UK banks that happens within 2 hours but usually appears immediately. Faster Payment is the service you’ll have used if you’ve ever made a payment via your online banking or phone app to send a friend any money you owe. 

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. This method may be a more convenient way of making payments, and it will not have a charge attached, unlike a CHAPS payment.

How long does a CHAPS payment take?

A CHAPS transfer will be in the receiving bank on the same day you send it, usually appearing within a couple of hours. To ensure it’s a same-day payment, you must send the CHAPS before 3 pm, but the receiving bank should 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 sent after this deadline, but it is better to be safe than miss a cut-off time for more considerable sums.

Make your financial management simple with Countingup

Now you understand the uses of the CHAPS payment system, you could make managing your business money simple too. Financial management can be stressful and time-consuming when you’re self-employed — that’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.