CHAPS vs. BACS payments: What’s the difference?

If your business is looking to transfer money to the UK, you have probably come across the CHAPS or BACS bank payment systems. They are two of the most common bank payment methods used for making high-volume or high-value transfers within the UK.

However, as a business based in Hong Kong, you may be unfamiliar with how these foreign payment services operate. So let’s take a look at what exactly are BACS and CHAPS, the differences between them, and what they mean for your business.

What is a CHAPS payment?

CHAPS stands for Clearing House Automated Payment System.

CHAPS is the bank-to-bank transfer system that runs through the SWIFT network. It is commonly used for sending a single, large amount of payment that needs to be received on the same day. For instance, when you buy a new house, pay tax, or get a new Tesla for your company. While there is no minimum or maximum payment limit, in most cases, CHAPS payments are valued over £10,000 (around HK$105,000). There are no transfer caps and no upper transfer limit.

If you have a UK bank account, these types of payments tap into a wide network, with over 30 direct banking participants and more than 5,000 financial institutions across the UK able to make and accept CHAPS transfers.

What is a BACS payment?

BACS stands for Bankers Automated Clearing Services.

First launched in 1968, the BACS system has over 50 years of history in the UK, which makes it the system that most people there have grown up with and understand.

It is an electronic payment system that processes the direct debit and credit transactions in the UK.

As you can imagine, it is the most commonly used bank transfer method in the country. Businesses use the BACS transfer network to handle their day-to-day payments, ranging from regular bank transfers, payments to vendors, employee salaries, pensions, and welfare payments.

In fact, over 100 million transactions go through BACS every single day.

Given the high volume of transactions that it handles, BACS payments require a longer processing time before arriving at the receiver’s account. 

They are used for low-value transactions (by banking standards, at least) and cap out at £250,000 (around HK$2,641,000) per transfer.

So, what’s the difference between BACS and CHAPS?

When deciding which payment method to use for transfering your money, it ultimately comes down to the purpose of your money transfer.

CHAPS payments are for settling large sums of money that are time-sensitive. It’s for making payments that need to be processed right away within the same day, such as buying a property or acquiring an expensive business asset.

BACS payments are used for your run-of-the-mill, day-to-day transfers that aren’t pressed for time. These include paying suppliers or sending the staff their weekly wages.

Which transfer method is faster?

BACS payments take anywhere from two to three days to complete.

CHAPS payments are faster by miles, offering bank-to-bank transfers within hours. Businesses are usually able to get same-day payment if the transfer is made prior to 3:00-5:00pm that day (depending on whether they choose in-person or online). Otherwise, next-day payment is available.

Which payment method is more expensive?

BACS payments are one of the cheapest ways to transfer money between UK banks. You can expect to pay anywhere from 5-50p (around HK$0.5-5) plus any additional fees charged by the banks per transaction.

CHAPS payments, on the other hand, are much higher. This is because the UK bank or payment partner is required to pay for access to and maintenance costs for the software and hardware needed to complete your transfer. For CHAPS payments you can expect to pay anywhere from £25-£35 (around HK$260-370) per transfer. As such, most tend not to make a high volume of these types of payments.

Airwallex international payment is faster and cheaper than CHAPS and BACS

In order to make a CHAPS or BACS transfer, you need to first open a UK bank account, which can be a long and tiresome process when you’re in Hong Kong. Airwallex offers a much faster and easier way to set up an overseas account for you to start sending and receiving money from the UK right away. Once you’ve opened an Airwallex global account, you can then set up a UK bank account within the click of a few buttons. 

Our goal is to make it as easy as possible for you to make your payments. We help you bypass traditional banks so you can transfer and collect funds seamlessly. Simply create your free borderless account with us and get started in minutes.

We also don’t think it’s right that you’re penalised simply for paying your bills, or your suppliers. So, with this in mind, Airwallex doesn’t charge you any fees for local or international transfers. No matter the value you’re sending, regardless of the number of payments you’re making, you’re able to transfer money completely free of any fees.

You get practically instantaneous, same-day transfers on all your transactions, too. This is because we use your local payment networks, not the SWIFT network, so your money is received in one business day or less — without the hefty fees.

So if you’re looking to find a difference between BACS and CHAPS, try Airwallex instead for a cheaper, faster alternative.

Get in touch with us today for a demo, and see how we can help you take the hassle out of making your business payments.