When it comes to making payments, there are two main types of payments - CHAPS and Bacs. So, what's the difference between the two? And which one should you use for what? Here's a quick guide to help you understand the difference between CHAPS and Bacs payments.
CHAPS payment is a method of making same-day money transfers. It’s only for pound sterling within UK bank accounts, and money is transferred bank-to-bank, usually for high-value amounts.
It stands for Clearing House Automated Payment System, and typically it’s used for one-off high-value payments, such as purchasing a property. Each transaction is more costly compared to the Bacs payments system - as a ballpark cost, it’s around £30 per transaction – so while it’s a quick and easy payment method, it can get expensive.
There is no upper limit or cap to payment values through CHAPS.
BACS stands for Bankers Automated Clearing Services and is used by businesses to pay for routine payments, such as salaries, installments etc. Bacs is usually used for low- value transactions, and there is a limit to the amount that can be transferred.
BACS stands for Bankers Automated Clearing Services and is used by businesses to pay for routine payments, such as salaries, installments etc. Bacs is usually used for low-value transactions and there is a limit to the amount that can be transferred.
Both Bacs and CHAPS are types of bank transfers, so the difference between chaps and Bacs is really about what service you need.
When it comes to payments, there are a few key differences between CHAPS and BACS:
CHAPS is for high-value, time-sensitive payments. Provided you’ve made the transfer prior to the cut-off time which can be between 3 pm and 5 pm, depending on if you’re doing it online or in person, you gain confidence that your payment will arrive on the same day.
Bacs is for regular payments that aren’t as time-sensitive. They usually take 2-3 days to clear, find out more about BACS payments timings by reading our blog.
Similarly, Bacs is a much cheaper way of transferring money between banks, which can be anywhere between 5p and 50p per transaction.
CHAPS is more expensive because your bank has to pay for the software and hardware needed to complete the transfer. Think somewhere between £25 and £35 per transaction.
It’s also worth noting that cancelling a CHAPS payment is not easy once it’s been made, recalling the funds is not always possible.
You can of course use both payment methods, Bacs for suppliers and payroll; CHAPS for large, one-off payments.
These payment methods are all bank transfers, but they’re not all the same and have key differences.
Bacs payments take up to 3 days to clear and are free to use. Faster Payments provide almost real-time payments between banks in the UK but are restricted in value.
CHAPS payments are reasonably easy. Simply get in touch with your bank with your and your recipient’s payment details. From there, your bank can set everything up for you.
Alternatively, you can do it online, so as long as you remember the cutoff times – which are determined by your bank – you can make your payment instantly or on the same day at the very least.
CHAPS payments are available to a closed network of financial institutions which have to be approved. Operated by the Bank of England since 2017, the network is highly secure and highly regulated.
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