BACS payments are the most popular ways to transfer money between bank accounts in the UK. Whenever you make or receive a bank transfer, the chances are that it is a BACS payment.
BACS is an electronic system that authorizes the transfer of money from one bank account to another. The payments are split into Direct Debit and Direct Credit. It is estimated that there are 2.1 billion BACS Direct Credit payments and 4.5 billion BAC Direct Debit payments made in the UK each year.
So what exactly is BACS? How do you make a BACS payment? And just how long does a BACS payment take?
We are going to answer these questions as we take a closer look at BACS, the biggest payment service provider in the UK.
How long does a BACS payment take?
BACS payments take up to three working days to process, but can sometimes be processed in two. This is true for both direct debit and direct credit BACS payments.
A BACS payment can only be processed on working days and no processing is done on weekends or bank holidays. Any payments made outside of these days or outside of 07:00 to 22:30 will be rolled over to the next working day.
What is a BACS payment?
A BACS payment refers to a money transfer between two bank accounts. BACS is the third-party authority that checks both accounts before the transaction is cleared and completed. A BACS payment can refer to a direct debit or a direct credit transfer.
BACS Payment Scheme Limited, formerly known as Bankers’ Automated Clearing System (hence BACS), is the organisation responsible for clearing automated direct debit and direct credit in the UK. Founded in 1968, BACS became a subsidiary of Pay.uk in 2018.
Most payments that go from one bank to another do so via BACS. There are other payments available but they usually cost money and they have to be requested.
Direct debit 
A direct debit transfer is when you set up a periodic automatic transaction from your bank account to another. For example, you may set up automatic recurring payments for your rent, internet, gym membership, etc., as direct debits. This makes regular bills and payments easy to manage as you don’t have to remember to send them out individually each time, it’s all done automatically once it’s all set up.
Direct credit
A direct credit transfer, also known as a bank transfer, is when you deposit money into another bank account and it is not automated. For example, you may pay someone as a one-off or pay a customer a refund using a direct credit BACS payment.
What is the BACS processing cycle?
So why does it take BACS three days to process a payment? Well, this is because they have a three-day processing cycle. Sometimes two of these days can be combined in one, but it is best to always assume that it will take three days.
- Day 1: Input. The Input day is the day when the BACS payment is submitted. Payments must be transmitted to BACS between 07:00 and 22:30, or else it will roll over to the next day. As we mentioned before, the payment must also be made on a business day (Monday to Friday) or it will be delayed until the next business day.
- Day 2: Processing. The Processing day is when the payment is sent to BACS to process and clear. BACS ensures that the account sending the money is sufficiently funded and that the recipient bank account is able to receive it.
- Day 3: Entry. Entry day is when the payment has been authorised and the money is debited from the payee’s account and credited to the recipient’s account.
How much does a BACS payment cost?
BACS payments are the cheapest way to transfer money. You can expect to pay between 5p to 50p per transaction, depending on the amount you transfer. However, many banks will waive the associated fee.
The reason that many shops have a minimum card spend is that as a business they must pay the BACS fee themselves. So it isn’t worth them taking a card payment worth 20p if they then have to pay half of that to BACS.
Which banks use BACS?
BACS payments are used by banks and financial institutions across the UK. It saves them time and money to have a third-party organisation clear the transfer rather than the banks themselves do it.
The UK banks and financial institutions currently using BACS payments are:
- Allied Irish Bank
- Atom bank
- Bank of England
- Bank of Scotland PLC
- Barclays Bank PLC
- Barclays Bank UK PLC
- Citibank NA
- ClearBank®
- Clydesdale Bank PLC
- Coutts & Co
- HSBC Bank PLC
- HSBC UK Bank PLC
- Lloyds Bank PLC
- Metro Bank
- Modulr
- Nationwide Building Society
- NatWest
- Northern Bank
- PayrNet
- Santander
- Starling Bank
- The Access Bank UK
- The Co-operative Bank
- The Royal Bank of Scotland
- TSB
- Turkish Bank UK
- Virgin Money
Is a BACS payment the only type of bank transfer?
There are three types of bank transfers in the UK: BACS, CHAPS, and Faster Payments. All of these are domestic bank payments in the UK. “SWIFT” is a messaging network that banks use to send money transfer instructions using a system of codes, allowing people to transfer money internationally.
CHAPS and Faster Payments are both more expensive than BACS, but both are also faster. Most banks waive the minuscule fee on a BACS payment but will charge if you opt for one of the faster alternatives.
SWIFT
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has been used since the 1970s. A SWIFT transfer is an international money transfer. It is the most commonly used option for sending money from a bank in one country to another and is highly secure.
SWIFT works by linking banks across the globe and using standardised codes to authorise payments. It consists of a network of 11,000 financial institutions located in over 200 countries. However, it is overseen by the G-10 central banks in Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, United Kingdom, United States, Switzerland, and Sweden, as well as the European Central Bank.
SWIFT payments usually take between 1 and 4 working days and the time it takes varies depending on the countries involved, their time zones, and the different banking and authorisation procedures in each.
SWIFT normally change between 3% to 5% in exchange rate costs.
CHAPS
Clearing House Automated Payment System (CHAPS) is a transfer system that is typically for high payments. A CHAPS payment is usually worth over £10,000 and has no upper limit to the amount you can transfer.
CHAPS guarantees a same-day payment as long as the transfer is made by a certain time on a working day – each bank will set its own hours.
The cost of making a CHAPS payment varies between banks but is usually around £25 per transfer.
Faster Payments
Faster Payments was launched in 2008 as a way to enable digital transfers to move quickly and securely between bank accounts within the UK, 24 hours a day. Money is sent in near real-time, meaning it transfers almost instantly. Faster Payments can take up to two hours to arrive, though this is uncommon.
Faster Payment can facilitate transfers of up £250,000. However, many banks and building societies will set their own upper limits which may be well below the £250,000 mark.
Fast Payments cost more than BACS but are still cheap. The cost ranges in price between banks. Some charge nothing for payments under a certain threshold, while others charge a few pounds.
How to make a BACS payment
Most people make BACS payments via online banking, though they can still be made by personally visiting your bank.
To make a BACS direct credit payment you will need the sort code and account number of the payee’s account. If you want to make the payment using online banking, then you simply set up the payee by inputting their bank account number and sort code and then writing in how much you wish to send them. You may then be asked to authorise your transaction with a card reader, which you will need to have previously requested from your bank. To authorise the transaction you place the card into the reader, enter your pin, and then transcribe the code shown on the reader into your online banking.
A BACS direct debit payment is usually set up by the organisation that is being paid. For example, if you pay a WiFi subscription, you give your bank details to the provider and they authorise a direct debit payment with BACS which they take from your account every month.
Summary
BACS payments are the most common form of bank transfer in the UK. They usually take three days to process, though they can be completed in two. There are other faster options for transfers within the UK, but BACS is the cheapest and most popular.
