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What do CHAPS bank payments mean in the UK banking system?

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Last editedJul 20202 min read

Are you considering doing business in the UK? If so, it helps to have a solid understanding of the different payment systems used by UK businesses. After all, payment processing differs between the UK and the US in a couple of important ways. CHAPS bank payments play a major part in the UK payments ecosystem but are likely to be unfamiliar to many US readers. As such, we’ve put together a handy guide to the topic of CHAPS banking. First off, what is a CHAPS bank transfer?

What is a CHAPS bank transfer?

CHAPS, which stands for Clearing House Automated Payments System, is a payment system that enables UK-based businesses to make large money transfers in GBP. As stated, it’s primarily used for high-value transfers, and since CHAPS banking guarantees same-day payment (with the proviso that your payment instructions need to be submitted before a specific time), it’s also a good method for time-sensitive transfers. For people who want to settle a money market or foreign exchange transaction, make payment on taxes, and so forth, CHAPS bank transfers can be ideal.

How much does a CHAPS bank payment cost?

Because they’re intended for high-value transfers and there’s no upper limit to the amount that you’re able to transfer, CHAPS is the most expensive type of bank transfer in the UK. The specific charges for making a CHAPS bank payment vary from bank to bank, but they’re mostly in the region of $30-40 (£25-30).

Can CHAPS bank payments be used for international transfers?

No, one of the key characteristics of CHAPS bank transfers is the fact that it is only used for sterling transactions within the United Kingdom. So, if you want to send a large sum of money from the US to the UK, from the UK to the US, or somewhere else entirely, you won’t be able to use CHAPS. However, there are plenty of international wire transfer tools that US-based businesses can use instead. It’s also important to note that the London branches of several American banks – such as JPMorgan Chase Bank, N.A. and Citibank – do facilitate CHAPS bank payments.

What are the alternatives to CHAPS?

Within the UK, there are a couple of different payment systems that people can use to transfer funds. Aside from CHAPS bank transfers, there’s also Faster Payments, Bacs payments, and SWIFT payments. Here’s a very brief summary of each of these payment types:

  • Faster Payments – Although Faster Payments are restricted in size (they generally need to be lower than $12,500, or £10,000), they offer near-instantaneous bank transfers. Since Faster Payments are used for smaller sums of money than CHAPS bank transfers, it’s probably best for multiple, rapid-fire business transactions.

  • Bacs payments – Used for domestic transfers, Bacs payments can take up to three working days to clear. Unlike CHAPS banking, there isn’t a charge for using Bacs payments. As Bacs is automated, it’s probably best for recurring business transactions.

  • SWIFT payments – Intended to be used for payments to international accounts, SWIFT payments can take anywhere between one and five working days to clear.

How to complete a CHAPS bank transfer?

If you’re in the UK and you need to send a CHAPS bank payment, the process is relatively simple. All you need to do is head into a branch of your bank (ensuring that you bring the payment details for you and the recipient) and they should be able to handle the entire transaction for you. Alternatively, you can complete the CHAPS banking process online. One important thing to note is that CHAPS has a very strict cut-off time, so you’ll need to be sure to complete the transaction before the deadline, which is set by your bank.

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