What is a CHAPS Payment?

Revolut Contributor

 · March 10, 2020  · 03/10/2020

The world of commerce moves quickly – and sometimes businesses and individuals need high-value transfers to clear at a faster pace. That’s where CHAPS comes in, the system for processing same-day payments made in sterling within the UK. So, what is a CHAPS payment? Let’s take a look...

What is a CHAPS payment?

CHAPS – or the Clearing House Automated Payment System – is a type of bank-to-bank transfer that’s used primarily for two things: high-value payments or ultra time-sensitive payments of a lower value. The important thing about CHAPS is that its payments are guaranteed to arrive with the recipient on the same day as you make the transfer – as long as you meet the requirements set by your bank.

There is no upper limit on the value of a CHAPS payment, however the sum should be higher than £10,000. Payments of a lower value are sometimes, but not usually, made via CHAPS – because banks charge a hefty processing fee for these transactions.

CHAPS payments can be made online, by phone, or in a bank branch. You’ll just need your payment details and those of your payee.

What are CHAPS payments used for?

CHAPS payments are used for high-value payments or for time-critical payments over £10,000. It is the payment method of choice for financial institutions and big business, as well as for corporations when paying taxes or making other high-value transactions.

It is also common for solicitors to use CHAPS when facilitating property transactions, such as when having a deposit put down on a house. The same can be used by individuals when they are buying a new car or something similar. There are about 200,000 CHAPS transactions a day in the UK, with an average daily value of around £330 billion.

How long does it take for a CHAPS payment to clear?

The essential aspect of the CHAPS payment system is that it operates same-day payments. CHAPS payments will clear within the day that you requested the transfer, usually within three hours.

However, to guarantee timely payment, you need to ensure that you meet the deadlines set by your bank. CHAPS opens in the morning at 6am, and most banks set daily cut-off points at 2pm or 3pm. However, if you request the transfer online before 5pm, it can often still clear on the same day.

If the deadline is missed, the transfer will wait until the next working day.

How much is a CHAPS payment?

The primary downside to CHAPS payments is that they are relatively expensive. The end-user is usually charged between £25 and £35 per transaction. This is why CHAPS payments have a lower limit of £10,000. There is no higher limit for the value of these transactions.

What is the difference between CHAPS and BACS?

A common question about different payment systems regards the difference between CHAPS and BACS.

BACS – or Bankers’ Automated Clearing Services – is used for the transfer of sums from bank account to bank account, usually through Direct Debit or Direct Credit. As opposed to the same-day CHAPS payments, BACS take three days to clear.

However, BACS payments are much more common than CHAPS transfers, with over 100 million transfers being made daily. This is because, although they are slower, BACS payments are free.

BACS also has an upper limit of £250,000 per transaction.

And between CHAPS and SWIFT payments?

We said above that CHAPS is for payments made within the UK. This is the thing that distinguishes it from SWIFT and SEPA payments, which are international.

SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is one of the largest payment systems in the world. It can be used to transfer different currencies to banks in almost all countries on the planet. CHAPS, on the other hand, can only be used to transfer sterling.

We hope we’ve answered your question, “what is a CHAPS payment?”, and below you can find more information about similar banking questions: