Have you ever wondered how money is paid when it comes to buying a property or a car? It’s through a CHAPS payment.

The system processes around £350 billion a day and is how banks transfer large sums of money to each other.

But what exactly are they and who else uses them?

This is everything you need to know about CHAPS payments.

What is a CHAPS payment?

CHAPS is one of the “largest high-value payment systems in the world”, according to the Bank of England website, which provides “efficient, settlement risk-free and irrevocable payments”.

It adds: “There are over 35 direct participants and several thousand financial institutions that make CHAPS payments through one of the direct participants.”

Who uses CHAPS payments in the UK?

Those who are classed as “direct participants” in CHAPS include the traditional high-street banks and several international and custody banks such as Barclays UK, HSBC and Lloyds Bank, the Bank of England reports.

“Many more financial institutions access the system indirectly and make their payments via direct participants. This is known as agency or correspondent banking.”

Tips for first-time buyers

Some of the main uses of CHAPS payments include:

  • Financial institutions and some of the largest businesses use CHAPS to settle money market and foreign exchange transactions
  • Corporates use CHAPS for high-value and time-sensitive payments such as to suppliers or for payment of taxes
  • CHAPS is commonly used by solicitors and conveyancers to complete housing and other property transactions
  • Individuals may use CHAPS to buy high-value items such as a car or pay a deposit for a house

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How do I send money through CHAPS?

If you’re wondering how money is sent through CHAPS, the Bank of England explains: “Payment obligations between direct participants are settled individually on a gross basis in RTGS on the same day that they are submitted.

“The transfer of funds is irrevocable between the direct participants.”

When it comes to operating hours, the CHAPS system opens at 6am each working day.

The Bank of England states: “Participants must be open to receive by 8am and must send by 10am.

“CHAPS closes at 6pm for bank-to-bank payments. Customer payments must be submitted by 5.40pm.”