why use CHAPS?

Dird

Hi,
So charges for a mortgage involve CHAPS fees for money transfers. Today I went into bank looking for ways to avoid myself having to pay this.
They told me that standing orders are limitless in branch so could be used in place of a CHAPS transfer for free.
They also have some "fast payment service" which should take 2-3 hours.

Why do companies not use a SO to transfer rather than CHAPS? Or are they probably using a SO but charging a fee pretending its CHAPS anyway?

I now plan to just set an annual SO & just cancel it after the first payment

agrinnall

Whoever told you that SOs are limitless is wrong, banks can (and do) set their own limits, and all Faster Payments are subject to the scheme limit of £100,000 (SOs are now a type of Faster Payment).

CHAPS is used because if the payment is made before the cut off time it is a guaranteed same day payment, which is not the case with any other payment method.

Dird

agrinnall wrote: »

Whoever told you that SOs are limitless is wrong, banks can (and do) set their own limits, and all Faster Payments are subject to the scheme limit of £100,000 (SOs are now a type of Faster Payment).

The cashier said after checking with someone behind, presumably her manager.
If SOs weren't realiable wouldn't most the people on here be burned with bank charges for their bank account cycles falling over (SO to move from acc B to the acc C before a previous SO has moved it to acc

But then I'm only looking to transfer £45k so perhaps it's "limitless" in my case as its above £25k but below £100k

pinkdalek

Dird wrote: »

Hi,
So charges for a mortgage involve CHAPS fees for money transfers.

It is the only guaranteed service in the industry. Whilst the other methods may work they are not guaranteed to get their within the required timescales that a CHAPS transfer would.
When you are purchasing something such as a property the funds being received by a solicitor is essential before the property can be completed/changed ownership.

pjread

Faster Payments are typically nearly immediate, but the 'guarantee' if you like is "by the end of the next business day".

CHAPS is guaranteed same day, as long as submitted by the deadline (1530?)

henm2

pjread wrote: »

CHAPS is guaranteed same day, as long as submitted by the deadline (1530?)

Be careful of the CHAPS deadlines. Some banks have quite early cut offs. With HSBC for example it is 2.30pm for payments to other banks, 5.00pm for payments to other HSBC accounts.

colsten

List of the FP and SO limits: http://www.fasterpayments.org.uk/consumers/transaction-limits

CHAPS limit is the available balance in your account.

Dird

So do people's SO cycles get thrown off schedule?
My Halifax plan was £750 in one day, £746 out the next day with £5 in the account (£1 after DDs).
If the first payment hadn't gone on the planned day would I get fined by Halifax for the 2nd SOs insufficient funds or would the first bank have to compensate me?

polymaff

Dird wrote: »

So do people's SO cycles get thrown off schedule?
My Halifax plan was £750 in one day, £746 out the next day with £5 in the account (£1 after DDs).
If the first payment hadn't gone on the planned day would I get fined by Halifax for the 2nd SOs insufficient funds or would the first bank have to compensate me?

Yes they do - but you make allowances for that when you choose FP/SO over CHAPS.

One other point to add to the excellent tutorial the others have given you. CHAPS transactions are one-off events. You never therefore arrange a CHAPS transaction for a non-bank-working day. SOs set up for, say, the n'th of the month will regularly hit non-bank-working days - but, as I say - you make allowances for that when you choose FP/SO over CHAPS.

colsten

Has anyone mentioned yet that CHAPS costs some £25 for each transaction? Whilst FPs and SOs do not cost anything (not as yet, anyway).

polymaff

colsten wrote: »

Has anyone mentioned yet that CHAPS costs some £25 for each transaction? Whilst FPs and SOs do not cost anything (not as yet, anyway).

The OP - in his OP :T