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What is a CHAPS Payment?

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Last editedNov 20223 min read

In the fast-moving world of business and commerce, your company needs to be able to make fast, efficient, and high-value payments. CHAPS is one option, giving businesses and individuals the opportunity to make guaranteed same-day payments via electronic, bank-to-bank technology. So, what is a CHAPS transfer? Read on to find out everything you need to know.

What does CHAPS mean?

CHAPS – also known as Clearing House Automated Payment System is a type of high-value, bank-to-bank payment system that provides irrevocable, settlement risk-free, and efficient payments.

Most traditional high-street banks are direct participants in CHAPS, as are a couple of international and custody banks. For a comprehensive list of CHAPS direct participants, see this list provided by the Bank of England. 

What is the purpose of CHAPS?

CHAPS guarantee same-day payment – as long as payment instructions are received by a specific time in the working day (the time is determined by your bank) – and there’s no limit to the amount of money that you can transfer via CHAPS.

In most cases CHAPS payments are worth over £10,000, and because they can be settled immediately, they are an excellent choice for anyone who needs to make a large, time-sensitive transfer, such as placing a deposit on a house, making timely payments to suppliers, or settling a foreign exchange transaction.

What is the difference between CHAPS, Bacs, and Faster Payments?

Sometimes, CHAPS, Bacs, and Faster Payments are confused with each other. They’re all forms of bank-to-bank payments, but there are key differences between them.

Bacs payments are a type of transfer that enables you to move money from one bank account to another bank account. There are pros and cons to taking Bacs payments - there's no charge to use them but you need time on your side as they may take up to 3 working days to clear.

Faster Payments, on the other hand, offer near real-time payments between bank accounts in the UK (see here: How long does a bank transfer take?), although unlike CHAPS, they are restricted in size.

If you need to receive a payment rapidly, another option is to use GoCardless Instant Bank Pay. Once you're set up with a GoCardless account, Instant Bank Pay offers an easy way to prompt a payer to authorise their payment to you.

By sending the payer a link that takes them into a quick and user-friendly flow, the payment can be confirmed within minutes. Payments can be up to £25,000 (although the customer's bank may impose a separate limit).

What are the benefits of using CHAPS payments?

There are two main benefits to using CHAPS to transfer funds.

  1. There is no limit to the amount of money you can transfer. This makes it the perfect high-value payment system.

  2. The guarantee of same-day payment – assuming that instructions are sent before the cut-off time – makes CHAPS payments excellent for one-off, time-sensitive payments.

What are the disadvantages of using CHAPS?

There are a couple of disadvantages associated with CHAPS payment.

  1. The strict cut-off times can add an additional level of complexity to your transfer.

  2. It is difficult to cancel a CHAPS payment once it has been made, so if you make a mistake, you may not be able to recall the funds.

  3. CHAPS is much more costly for the end-user than other payment systems, with banks typically charging around £25-30.

How does a CHAPS payment work?

CHAPS is a relatively straightforward process. Here's how to make a CHAPS payment: All you need to do is head to the bank with all your payment details (as well as the details of your payee) and they should be able to set up the entire transfer for you. If you would prefer, you can also make a CHAPS payment online. Remember that CHAPS payments have strict cut-off times – the system opens at around 6am each working day and payment instructions must be sent by a certain time (determined by your bank). Most of the time, CHAPS payments are made instantly, but in all cases, payment will be made on the same working day.

How long does a CHAPS payment take?

A CHAPS payment is received same day, provided it is submitted by the bank's cut-off time. If it is submitted after this time, the CHAPS payment will be received the next working day.

What is the CHAPS payment limit?

There is no CHAPS payment limit.

Are CHAPs payments safe?

The CHAPs system is seen as highly secure due to being a closed network of approved financial institutes. It is highly regulated and the Bank of England has been responsible for running CHAPs since 2017.

We can help

GoCardless makes the payments process simpler and more streamlined. Businesses save time and money by collecting payments via the GoCardless bank-to-bank payments network, powered by Open Banking and Direct Debit technology. Find out how GoCardless can help you with ad hoc and recurring payments.

Article sources

https://www.bankofengland.co.uk/payment-and-settlement/chaps

https://www.fasterpayments.org.uk/transaction-limits

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