What is the difference between CHAPS and Faster Payments?

When making bank transfers from the UK, there are many different methods you can use, whether you’re sending to someone else within the country or internationally.

Most banks offer CHAPS, Faster Payments, Bacs and more, but which is best? What is the difference between CHAPS and Faster Payments? Continue reading to discover more.

What is CHAPS?

Clearing House Automated Payment System (CHAPS) has been in operation since 1984. CHAPS payments are used for high value retail and wholesale payments within the UK and are generally used for one-off payments.

Despite there being no minimum payment limit, CHAPS payments are not typically used for low value financial transfers because they cost money to process. The charge per transaction can vary between banks but it will usually be in the region of £30. So while CHAPS can be quick, it isn’t cost-effective if you’re making lots of smaller transfers.

CHAPS payments usually tend to be over £10,000 and can be settled immediately. This makes them perfect for large transfers that are to be received right away, such as paying a deposit on a house. If you’re making multiple transfers under several thousand pounds, then Bacs is the better option.

While CHAPS is seen as an effective way to transfer large amounts of money, it must be noted that some banks do not accept those payments after 3pm. This renders the same-day payment process void as, if transferred too late, it will not be processed until the next working day. Should you miss the cut-off time on a Friday, that means it’s unlikely to be processed until the following Monday.

What is Faster Payments?

The Faster Payments service was set up in 2008 and is a type of electronic payment transfer designed to speed up the process of sending money within the UK. Its aim is to reduce payment processing time of bank-to-bank payments and is now the most common method of everyday money transfers in the UK.

In 2022, the maximum possible limit for sending a transfer using Faster Payments was set at £1 million. However, certain banks will impose their own transaction limits set for personal payments and business payments. Barclays, for example, have set their business transaction limit to £1,000,000 for online payments, while Co-Operative’s limit is set at £100,000 across the board. Monzo, who reflect the new age of online banking, have their business transactions limit set to just £10,000, so it’s clear to see just how much the limits vary across the banking industry in the UK.

Anything up to this figure could arrive in the recipient’s account within a couple of hours, but normally within seconds.

The service is currently free of charge for customers.

What type of payments can be made using Faster Payments?

There are four types of payments that can utilise the Faster Payments service, and they are:

• Single immediate payments - The most common type of payment. This could involve an individual transferring a small amount of money to another of their accounts or to a friend or family member.
• Forward-dated payments - One-off payments sent and received on a prearranged date decided by the customer.
• Standing Orders - Regular payments that pay a set amount to the same recipient on regular dates.
• Direct corporate access payments - Service for business customers in which payment messages can be sent directly to the Faster Payments Service in the form of bulk files.
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Key differences between CHAPS and Faster Payments

While Faster Payments and CHAPS offer a similar service, with almost instant money transfers within the UK, there are some key differences between the two.

For a start, there is no limit set to CHAPS payments. An individual or company can transfer any amount of money using CHAPS, but Faster Payments is limited to anything under £1 million. However, Faster Payments are generally less expensive to use compared to CHAPS, while some banks waive a usage fee altogether. Faster Payments is also available any time, any day, while CHAPS is only available during working hours between Monday and Friday.

While CHAPS is a same-day payment transfer service, Faster Payments is a lot quicker, often moving the money between accounts within seconds.

Finally, the payment reference for a Faster Payments transfer is only 18 characters but CHAPS has no limit.

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