BACS, CHAPS and Faster Payments are all electronic payments, however there are some important differences between them to help you understand when and how they should be used.
BACS stands for Banker’s Automated Clearing Services, and is a system which is used to send payments directly from one account to another. Typically, most people receive their salary from their employer via BACS payment of some type.
The main use of these are for payments made by direct debit. BACS payments typically take 3 working days to clear, and can be up to the value of £20 million for retail clients.
CHAPS stands for Clearing House Automated Payment System and have been in use since 1984. Typically, CHAPS payments are used for retail and wholesale, high value payments – usually worth over £10,000.
As these types of payments are more costly to process, they are typically used for larger sums and more important payments (for example payment of a deposit on a house). With CHAPS payments, funds are likely to clear within the same day.
Faster Payments are available for standard transfers within the UK – acting as one of the quicker ways to move money around. The maximum transaction limit set by the Faster Payments operator is £250,000 – for larger payments, we would recommend utilising CHAPS.
Faster Payments typically happen instantly but can take up to 2 hours. It is important to know that now all providers are set up to accept faster payments.
Here at the Tipton, we do accept faster payments. You can check other providers using the Faster Payments website, at www.fasterpayments.org.uk/sort-code-checker.
Which Should I Use?
The type of payment used depends on the nature of what you are doing.
For transferring small sums to friends and family, this is usually done through faster payments. However, for more regular payments (for example your monthly mortgage direct debit) this is most likely to be completed via a BACS payment.
Finally, CHAPS payments are more commonly used by businesses or as a one off when purchasing something costly.