Ever been confused by the myriad ways of transferring money online?  Want to know the very best way to do it efficiently and at the lowest cost?  If so, read on.

The most commonly known terms for bank transfers online are;

  • Faster Payments
  • BACS
  • CHAPS
  • SWIFT
  • Direct Debit
  • Standing Order
  • Apps

So what is the difference between these bank transfer methods?

Faster Payments

Faster Payments are available for bank to bank transfers within the UK, and, as the name suggests, are typically one of the quicker ways to move money between bank accounts. In most cases a Faster Payments transfer is processed in a matter of seconds. You could use this route to pay a friend if you owe them a small amount of money and want to get it to them quickly, for example. Faster Payments have been available in the UK since 2008.

23 banks and building societies currently offer this service and they can each set their own transaction limits and charges. The maximum transaction limit set by the Faster Payments operator is £1 million.*

BACS payment

BACS stands for Banker’s Automated Clearing Services and the BACS payment system has been in existence for 50 years already

BACS payments are used for bank transfers within the UK, including Direct Debits. Most people receive their salary from their employer via a BACS payment of some type, for example. Usually, it takes a couple of days to receive a BACS payment, which can be up to the value of £20 million for retail clients.

CHAPS payment

The Clearing House Automated Payment System (CHAPS) has been in operation since 1984.

CHAPS payments are used for retail and wholesale, high-value payments within the UK. Although there’s no minimum payment limit, CHAPS payments are not generally used for low-value transfers because they’re typically quite expensive to process.

CHAPS payments are usually worth over £10,000 and can be settled immediately, making them perfect for large, and critical transfers which have to be received right away, like paying a deposit on a house.

SWIFT payment

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a network that allows banks to communicate financial information securely.

SWIFT payments are offered by most UK banks and building societies, for international money transfers and involve a series of banks which work together to make sure your money ends up in the right place.

You can think of it like making a journey yourself. If there isn’t a direct flight to your destination, you might end up taking a series of connecting flights to get there. In the same way, your SWIFT payment can end up being moved between 1-3 correspondent, or intermediary banks, before reaching your recipient. SWIFT payments are the most common choice for UK high street banks making international payments but they’re not necessarily the cheapest or fastest option out there. 

Direct Debit

Simply, a Direct Debit is an instruction from you to your bank or building society. It authorises the organisation you want to pay to collect varying amounts from your account but only if you’ve been given advance notice of the amounts and dates of collection.

Once you have agreed to those, the money is deducted automatically. If the organisation you are paying wants to change an amount or date of collection, they have to tell you about it first.

In a nutshell, Direct Debit is the simplest and most convenient way for you to pay regular and occasional bills.​​​ It means you don’t have to worry about missing those important payments, especially when on holiday, at busy times of the year, or in fact doing anything more enjoyable than thinking about bills!

Although in theory, a Direct Debit has to be cancelled by the payee, in practice you can cancel one yourself online though it is best to agree it with the payee first in order to avoid any surprise penalties.

Standing Order

A Standing Order is a regular payment that you can set up to pay other people or organisations or transfer to your other bank accounts. You can amend or cancel the Standing Order as and when you like.  Unlike a Direct Debit, any changes to the amount payable have to be amended by you manually.

Apps

Last but not least are apps which are usually accessed on mobile devices such as mobile phones, tablets and even electronic watches but also sometimes on desktops and laptops.

There are numerous apps that allow bank transfers such as online banking apps, Paypal, digital wallets, personal finance apps, Apple Pay, Google Pay etc.  Just find the one that most suits you.

So there you have it.  An array of ways to transfer money online which can save you both time and money.  You know it makes sense.**

*It is now possible to send individual payments of up to £1 million using the Faster Payments System, but those organisations offering the service can set their own limits, depending on how the payment is sent, and the type of account their customer is sending from.

**Risk warnings

The value of your investment can fall as well as rise and is not guaranteed. The contents of this blog are for information purposes only and do not constitute individual advice. You should always seek professional advice from a specialist.  All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.

Now available on our podcast!

Our Scorecards

Try out our quick and free assessments; your personalised reports will instantly be created.

Useful guides

We've created two useful documents to help you find a Independent Financial Adviser and make sure you get the most from them.

16 Questions To Ask Your Independent Financial Adviser

How to find an Independent Financial Adviser

    To download this file, please fill in your information below.