Bacs vs CHAPS payment: What is the difference?

When you need to send money to a bank account, there are two popular payment methods in the UK to choose between: CHAPS and Bacs. Each system offers features that are tailored to different needs. Whether it’s for payroll or urgent payments, knowing the difference between these payment methods will ensure you choose the right one for your needs.
We compare the speed, costs, and limits of CHAPS vs Bacs payments, helping you to find the best method for your transactions.

 

In this article

• What is the CHAPS payment method?
• What is the Bacs payment method?
• The major differences between Bacs and CHAPS
• Which payment method is better for your business?

 

What is the CHAPS payment method?

The CHAPS payment method stands for Clearing House Automated Payment System. It’s a same-day bank-to-bank money transfer that allows you to send large sums of money.
CHAPS payments are best suited for one-off, high-value payments that need to be received on the same day, such as paying a deposit on a commercial property.

 

What is the Bacs payment method?

The Bacs payment method stands for Bankers’ Automated Clearing Services. It’s a bank-to-bank transaction for direct debits and direct credits over a three-day period.
Bacs payments are the most widely used bank transfer methods in the UK. If you use a money transfer app, you’re probably using Bacs payments without realising it. This payment method is commonly used for payroll, bill payments, and other regular, scheduled payments.

The major differences between Bacs and CHAPS

There are a few key factors that set CHAPS vs Bacs payments apart. Understanding these differences will help you decide which payment method suits your needs best.

Which transfer method is faster?

CHAPS is the faster transfer method as it allows you to send and receive money on the same business day. This same-day transfer depends on if you meet the bank’s cut off time, which varies across banks and whether you perform the transaction online or in-person.
Bacs transfers, while reliable, can take up to three business days to clear. This makes Bacs payments better suited to routine payments, and CHAPs payments the top choice when speed is your priority.

Which payment method is more expensive?

While faster, the CHAPS payment method is more expensive. You can typically expect a transaction fee between £25 to £30. Banks will charge a higher fee for using CHAPS due to the speed and efficiency of this service.
Bacs payments are the cost-effective option for non-urgent transfers. Depending on the amount you are transferring and your selected bank, you can expect the fee to range between £0.05 and £0.50 per transaction. Your bank may also charge additional transaction fees.

How do refund policies work?

Refund policies for Bacs and CHAPS can vary depending on the bank and the transaction.
CHAPS transfers are final once they’re processed, making refunds difficult. If you have made a mistake in your CHAPS payment, such as incorrect account details, you must reach out to your bank. If a fraudulent CHAPS payment was made, your bank will follow their fraud procedures to recover the funds.
Bacs offers protections like the Direct Debit Guarantee. The Direct Debit Guarantee means you can claim a full and immediate refund from your bank for any payment made in error. For example, if your bank mistakenly collects a payment, collects a payment on the wrong date, or takes a payment after you have cancelled the direct debit.

What are the transfer limits?

CHAPs payments have no upper transfer limit, making it the best choice for sending large sums of money.
There are transfer limits for Bacs payments. The upper limit will depend on your bank and can range from £10,000 to £250,000. This is why Bacs payments are more commonly used for regular, smaller transactions such as payroll, where lower limits are less of a worry.

Which payment method is better for your business?

Both Bacs and CHAPS are beneficial payment methods for your business transfers. Choosing between them will depend on your specific payment needs.
We have a quick comparison of all the factors you need to make your decision between CHAPS payment vs Bacs:
• Speed: CHAPS is best for immediate transfers, such as paying urgent supplier invoices or emergency repairs. Bacs is more suitable for non-urgent, planned transactions like lease payments.
• Value: Use CHAPS for paying large amounts of money, such as buying a new piece of equipment or making a down payment on a commercial property. Use Bacs for lower-value payments like replenishing office supplies.
• Cost: CHAPS has higher transaction fees, making Bacs more cost-effective for routine payments.
• Frequency: Bacs is ideal for regular payments like payroll. CHAPS payments are for occasional, time-sensitive needs.

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FAQs about Bacs vs CHAPS

Which type of bank transfer is a Bacs or CHAPS payment?

Bacs and CHAPS are both types of bank transfers in the UK. Bacs is a cost-effective payment method ideal for regular, non-urgent payments. CHAPS is a same-day payment method suited to transferring large amounts of money.

Do banks charge for Bacs transfers?

Banks typically charge lower fees for Bacs transfers compared to CHAPS. Some banks might offer free Bacs transfers, especially for regular business operations like payroll.

What countries is Bacs used in?

Bacs is a UK-based payment system for direct debits and direct credits, such as payroll processing.

Does Western Union support Bacs and CHAPS?

Western Union allows you to send money abroad more than 200 countries, either online or through the app. Bacs and CHAPS are used for domestic UK payments.