Many people are aware of the terms BACS, CHAPS and Faster Payments, know that they are related to payments, but are unsure of the specifics surrounding them. The purpose of this article is to identify and explain exactly what is meant by BACS Payment, CHAPS Payment and Faster Payments.
What is BACS?
BACS is an acronym standing for Bankers' Automated Clearing System. It is one of the UK's inter-bank transfer facilities and is used to process electronic transactions and transfers. The majority of the things processed using the BACS system are direct debits and direct credits. A direct debit is an instruction from an account holder to their bank, authorising a company to withdraw varying amounts of money. Direct Debits are used to ensure a payment can be made regularly, safely and efficiently. They are among the most common financial transactions in the world. A direct credit is effectively the opposite of a direct debit and is commonly used to transfer wages into the bank accounts of employees.
Until recently, BACS was also the system at the forefront of one off online payments and payments made through the telephone. However, it was recently introduced by the Faster Payments system. The reason for this is the efficiency of Faster Payments, which processes almost instantly. What's more is it is able to do this at any time of day, 365 days per year. BACS payments on the other hand take a minimum of 3 banking days to process. Some accounts do not allow for the use of faster payments, therefore they still rely on BACS.
What is CHAPS?
As you may have guessed, CHAPS is also an acronym; it stands for Clearing House Automated Payment System, although it is rarely referred to by its full name. CHAPS is another system used for processing payments in the UK. Although anybody is able to use CHAPS, it is a system usually used by businesses in transactions involving large sums of money. Using the CHAPS systems usually incurs a charge of 25 - 30.
CHAPS transfers usually process within a day and is commonly used in the purchase of property, with solicitors using the system to transfer funds between the bank accounts of the parties involved. It is also used in other high value payment scenarios.
As mentioned earlier CHAPS is used to move funds inter-bank; it is used for this purpose several times a day.
In order to make a payment through CHAPS, one usually has to visit your bank with a form of ID to prove your identification. Before making a CHAPS payment, it is worth checking the limit of your bank's faster payments transfers. Faster Payments can commonly be used for transfers of up to 100,000 and it is instantaneous as well as being free. This is particularly applicable for individual users (as opposed to companies and organisations).
What is Faster Payments?
As mentioned above, the Faster Payments service allows the general public to make payments with the funds being processed and transferred almost instantly. It is regularly used by the general public to make payments such as bills, standing orders and online transfers. The System has been in operation since 2008.