BACS Transfers - where does the money go?

frothy-coffee_2

Hi,
I think some are virtually instaneous now, but others can take a few days.

What happens to the money in that time?

And who earns the interest on it?

bengalknights

Fast payments is instant

Standard 3 days 1 day is spent with your bank and 1 day with the other bank so they would get the interest during the transmission period.

[Deleted User]

Faster Payments or FPS would be instant and same with CHAPS transfer

georgialeybourne

Bacs takes 3 days to arrive BUT the funds are simultaneously debited from the payer's account and credited to the payee's account on day 3 so only the payer would benefit from interest if the funds were coming from an interest bearing account.

Many banks now support Faster Payments which is a near real time transfer (max. 2 hrs). You can see a full list of which banks offer Faster Payments on the Payments Council website - paymentscouncil.org.uk

For consumers both Bacs and Faster Payments are free of charge whereas CHAPS, which is also a same day payment mechanism for larger values, is chargeable.

Sceptic001

georgialeybourne wrote: »

Bacs takes 3 days to arrive BUT the funds are simultaneously debited from the payer's account and credited to the payee's account on day 3 so only the payer would benefit from interest if the funds were coming from an interest bearing account.

Surely this is not correct. In my experience BACS payments are deducted from the payer's account immediately and turn up in the payee's account 2-4 working days later.

jambosans

Sceptic001 wrote: »

Surely this is not correct. In my experience BACS payments are deducted from the payer's account immediately and turn up in the payee's account 2-4 working days later.

I believe georgialeybourne is correct.

Although the exact process is not clear on the Bacs website, the below link seems to confirm Bacs payments are simultaniously debited and credit on Day 3 of the cycle (in the same manner a Direct Debit works):-
http://www.albany.co.uk/knowledge-centre/bacs-process-explained/

Banks may remove the money from your account, but this is no doubt due to internal pre-processing on the sending banks part. This is backed up by the fact banks have different cut-offs for BACS transfers. For example, the HBOS cut-off for a next working day BACS is 6pm the prior working day, where with Lloyds TSB is 10pm (or something similar).

Sceptic001

jambosans wrote: »

I believe georgialeybourne is correct.

Although the exact process is not clear on the Bacs website, the below link seems to confirm Bacs payments are simultaniously debited and credit on Day 3 of the cycle (in the same manner a Direct Debit works):-
http://www.albany.co.uk/knowledge-centre/bacs-process-explained/

Banks may remove the money from your account, but this is no doubt due to internal pre-processing on the sending banks part. This is backed up by the fact banks have different cut-offs for BACS transfers. For example, the HBOS cut-off for a next working day BACS is 6pm the prior working day, where with Lloyds TSB is 10pm (or something similar).

Yes, I think we were talking at cross-purposes. I was defining the payer as the bank customer making the payment. georgialeybourne was defining the payer as the bank transferring the money on its customer's behalf. When the BACS website says "Payments are simultaneously debited from the recipients’ accounts and credited to your account" it is referring to "service users" (in this case the bank), not the individual bank customer.

My point was that when making a BACS transfer, the money is removed from the customer's account straight away (thus no longer earning interest).

The customer's bank then holds the money until the third working day, at which point the transfer is made. So it is the bank making the transfer which gets the benefit of the money during those three (or more over a weekend) days, not the bank's customer.

DCodd

Sceptic001 wrote: »

Yes, I think we were talking at cross-purposes. I was defining the payer as the bank customer making the payment. georgialeybourne was defining the payer as the bank transferring the money on its customer's behalf. When the BACS website says "Payments are simultaneously debited from the recipients’ accounts and credited to your account" it is referring to "service users" (in this case the bank), not the individual bank customer.

My point was that when making a BACS transfer, the money is removed from the customer's account straight away (thus no longer earning interest).

The customer's bank then holds the money until the third working day, at which point the transfer is made. So it is the bank making the transfer which gets the benefit of the money during those three (or more over a weekend) days, not the bank's customer.

We pay our wages and salaries via BACS on a Wednesday to credit our staffs account on the Friday. The funds leave our account on the Friday and credit our staffs accounts also on the Friday.

Sceptic001

DCodd wrote: »

We pay our wages and salaries via BACS on a Wednesday to credit our staffs account on the Friday. The funds leave our account on the Friday and credit our staffs accounts also on the Friday.

Yes, BACS customers ("service users") have this facility, but if you paid your staff via a regular online banking service the funds would leave your account straight away but still take 3 working days to hit your staff's accounts.

jambosans

Sceptic001 wrote: »

the funds would leave your account straight away

I'm not being pedantic, but this is misleading.

Normally BACS transfers are processed in batch overnight. For example, as I said previously, if you make a BACS transfer with HBOS the funds leave the account the next working day, if the transfer is requested the prior working day before 6pm. Most banks have a similar process in place. This means that the total number of days in which the funds are neither in the payer or payee account is two working days.

As one-off Faster Payments are real-time then the funds actually "leave your account straight away."

Sceptic001

jambosans wrote: »

I'm not being pedantic, but this is misleading.

Normally BACS transfers are processed in batch overnight. For example, as I said previously, if you make a BACS transfer with HBOS the funds leave the account the next working day, if the transfer is requested the prior working day before 6pm. Most banks have a similar process in place. This means that the total number of days in which the funds are neither in the payer or payee account is two working days.

I am not familiar with HBOS, but am surprised that they do not deduct the money from your account on the same day you request the transfer. All the accounts I use deduct the money straight away. Eg. Egg is typical:

6.4 Money paid into your account by cheque will start earning interest on the third Business Day (including the day we receive the cheque), so for example if we receive a cheque on Monday we will normally start paying interest on Wednesday. In the case of other payments, interest will accumulate from the Business Day on which we receive the funds. In relation to certain payments (for example, Faster Payments and debit card payments) received on non-Business Days, interest will accumulate from the non-Business Day on which we receive the funds. Money taken out of your account will earn interest to (but not including) the day of withdrawal.
http://new.egg.com/visitor/0,,3_112561--View_2454,00.html

So you do not even earn interest on the date of withdrawal because the closing balance has been reduced accordingly. Similarly, current accounts I use update the balance immediately when a BACS payment is made.