Difference between CHAPS and BACS payments ?

shawn michaels
shawn michaels Registered Posts: 52 ? ? ?
I know CHAPS = Clearing house automated payments, and BACS takes 3 days to clear what is the difference ? Why use one over the other ? Can't google due to internet work firewall, and current lack of internet at home. Thanks.

Comments

  • timwright116
    timwright116 Registered Posts: 9 Regular contributor ⭐ ? ⭐
    CHAPS payments are immediate, no need to wait 3 days, usually if the CHAPS payment is sent before 17:00, the benificiary will receive it not long after you sent it.. You will also incurr a cost for CHAPS usually between £10 & £15... hope this helps!
  • MWAUGH1983
    MWAUGH1983 Registered Posts: 420
    CHAPS is a menthod of payment which is cleared within 24 hours (next day) so obvious benefit. We have them at work when suppliers want urgent payment as it might have been our fault if payment has been made so its a convneience thing. Also if payments are urgent and high amounts - this is preferred as CHAPS costs considerably more so they tend to be one off payments.

    Thats why companies tend to have more than one BACS run per week.

    Hope this helps!

    Martin
  • stevef
    stevef Registered Posts: 258 ? ? ?
    BACS is good for bulk payments to a large number of individuals, it is perfect for creditor payment runs and payroll. It used to entail sending magnetic tapes of payments details to BACS by courier, but thankfully you can now send the details down the superdooper electronic highway.

    CHAPS payments are made by phone, or fax, or over the internet and are designed for one off payments, each payment has to be requested separately. CHAPS are good for emergency payments or large payments you need to ensure get there.

    We use BACS for regular payments and payroll, and CHAPS for failed BACS transactions and where timing is essential to avoid penalty charges (eg commuted pension payments, PAYE tax etc.) or to oversea bank accounts.
  • blobbyh
    blobbyh Registered Posts: 2,415
    Blinking CHAPS costs us £17.50 a throw so we reserve them for dire emergencies only or where the creditor - such as a contractor - wants to pay the cost themselves to receive their "wages" earlier than by BACS (by making the beneficiary pay any charges).

    CHAPS can be within a few minutes whereas BACS is (nearly always) two days providing cut-off schedules for both have been met.
  • mini_schnauzer
    mini_schnauzer Registered Posts: 347
    You have another choice - Faster Payments Service (FPS).
    Cost around the same as BACs, but instead of 3 days - 95% of the time the payment reaches the destination bank account within 2 hours.
    Max you can sent is £10,000 via this method.
    We use it at work along with BACs, via our HSBC internet banking.
    Alot cheaper than CHAPs.
  • Claire321
    Claire321 Registered Posts: 209 ? ? ?
    Faster payments are easy to send but a single faster payment costs us more than a single CHAPS.

    We get charged £10 for each faster payment batch and £4 for each payment within a batch (therefore a single payment costs £14, but it gets cheaper per payment the more we send together) whereas a CHAPS costs us £12.

    Our bank kept these faster payment costs quiet, until I asked!
  • mini_schnauzer
    mini_schnauzer Registered Posts: 347
    Thats alot - we get charged 21p per FPS only! and no batch charge.
    Maybe because it is a small business account?
  • shawn michaels
    shawn michaels Registered Posts: 52 ? ? ?
    Thanks for the replies everyone. Now I understand the difference even though I'm AAT qualified lol. I missed that one during foundation level. I will certainly prioritise payments at work more carefully after this thread. Thanks again.
  • Claire321
    Claire321 Registered Posts: 209 ? ? ?
    Thats alot - we get charged 21p per FPS only! and no batch charge.
    Maybe because it is a small business account?

    We are with HSBC and use HSBCnet, we have about 30 different bank accounts with them so I guess we are a large customer and they charge us for the privilege!
  • blobbyh
    blobbyh Registered Posts: 2,415
    Thanks for the replies everyone. Now I understand the difference even though I'm AAT qualified lol. I missed that one during foundation level. I will certainly prioritise payments at work more carefully after this thread. Thanks again.

    Are you in charge of your company's cashflow and credit control then?
  • shawn michaels
    shawn michaels Registered Posts: 52 ? ? ?
    blobbyh wrote: »
    Are you in charge of your company's cashflow and credit control then?

    Hi Robert. No, I'm just an assistant accountant who reconciles our many bank accounts and process a high volume of items for payment. The company I work for deals with admin for "clients" so I just do the admin for payments but have to reconcile the many bank accounts we have. My boss is probably the one who's in charge of the cashflows and prioritisation of payments. I'm still learning but that aspect of the job between the different types of payments is something I should have understood. I did not realise how expensive CHAPS were you see, especially from your post. Thats explains why my boss gets so grumpy about them lol
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