What is CHAPS?
CHAPS, or Clearing House Automated Payment System, is a same-day sterling payments system that separates itself by offering real-time gross settlement (RTGS) capabilities in the United Kingdom. It allows users to make high-value and time-critical payments typically of an urgent nature, ensuring that funds are cleared and settled almost instantaneously. CHAPS payments are irrevocable and usually used for large financial transactions, both by businesses and individuals.
Key Features of CHAPS
- Real-Time Settlement: Payments are processed and settled in real-time on a gross basis, meaning each transaction is settled individually without netting against other transactions.
- Same-Day Clearing: Payments are typically settled on the same business day, provided they are initiated within specific timeframes.
- High Security: Transactions are secure and have an audit trail, making CHAPS a trusted way to move large sums.
- Irreversible Payments: Once a CHAPS payment is made, it cannot be reversed, ensuring finality of the transaction.
Examples of CHAPS Usage
- Buying Property: A common use of CHAPS is by individuals or law firms handling property transactions, where a large amount of money needs to move quickly and reliably.
- Corporate Payments: Businesses often use CHAPS for important transfers such as paying suppliers or distributing payroll on the same day.
- Interbank Transfers: Banks frequently use CHAPS to settle payments directly between each other, often for large volumes of money in financial markets.
Frequently Asked Questions (FAQs)
What are the costs associated with making a CHAPS payment?
Banks generally charge a fee for making CHAPS payments, often between £25-£30 per transaction. It’s always best to check with your bank for the precise cost.
What information do I need to make a CHAPS payment?
To make a CHAPS payment, you’ll need the recipient’s bank account number, sort code, name, and reference details to ensure the payment reaches the correct account.
Are there any time restrictions for making CHAPS payments?
CHAPS payments must be initiated during the bank’s operational hours, typically before 5:00 PM to ensure same-day processing. Timing can vary slightly between different banks.
Can I cancel a CHAPS payment once it has been initiated?
No, once a CHAPS payment is initiated, it is irrevocable and cannot be cancelled or recalled due to its real-time nature.
How does CHAPS differ from Faster Payments?
While both CHAPS and Faster Payments facilitate electronic payments, CHAPS is primarily used for higher-value transactions and guarantees same-day clearing. Faster Payments usually caters to lower-value payments with no guarantee for same-day settlement.
Related Terms
- BACS (Bankers’ Automated Clearing Services): A UK scheme for electronic processing of financial transactions, typically for regular, lower-value payments such as salaries or direct debits.
- RTGS (Real-Time Gross Settlement): A specialist funds transfer system where the transfer of money or securities happens from one bank to another in real time and on a gross basis.
- FPS (Faster Payments Service): A UK banking initiative to reduce payment times between different banks’ customer accounts from several working days to mere seconds.
Online Resources
Suggested Books for Further Studies
- “Payments Systems in the U.S.: A Guide for the Payments Professional” by Carol Coye Benson
- “The Payment System: Design, Management, and Supervision” by Bruce J. Summers
- “Money and Payment Systems” by Antoine Martin
Accounting Basics: “CHAPS” Fundamentals Quiz
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