In today’s society you can do almost everything online. With the phasing out of cheques in the UK by 2018 and extensive services offered by every bank, understanding which payment method to use can sometimes be quite confusing. This article provides an explanation of what the most common payment methods that banks provide actually are.
BACS & FASTER PAYMENTS
BACS is a free service by which a person can send money electronically to another bank account. Sending a BACS is simple, all you need is the account number, sort code and account holder’s name to make a BACS payment. Payment is taken immediately from your bank account and credited to the other bank account usually within 3 working days.
The Faster Payments scheme was launched in May 2008 to provide the consumer with a fairer payment method. This new payment method works in the same way as BACS payments except the payment is usually credited to the other bank account within 2 hours. Before confirming your payment your bank should let you know when your payment will be credited to the receiver’s bank account. There is no cost for Faster Payments but not all banks provide this facility and when making payments that have receiving deadlines, such as your credit card bill, you should always allow at least 3 working days for the payment to clear regardless of whether you are using the Faster Payment method as you may be charged a late payment fee if your payment is delayed.
CHAPS is another type of electronic payment. Providing that you instruct your bank to make the payment before 2pm, CHAPS payments are guaranteed to arrive in the receiving bank account the same day. There is a charge of around £25 for this service depending on your banking provider. With the introduction of Faster Payments you can save yourself the £25 fee as long as you do not need the same day payment guarantee.
STANDING ORDERS (STO)
A standing order is a payment method where you instruct your bank to pay a person or organisation on a specific date for a specific amount. This payment can be a one off payment or on a set date every week / month or year. The control for standing orders always remains with you and you can amend or cancel the standing order. Many people get mixed up between standing orders and direct debits – the key difference is with who has control over the payments.
DIRECT DEBITS (DDR)
Direct Debits are set up by the organisation you are paying i.e council tax, or utility bills. You are require to agree to a direct debit on a specific date each month. The date and amount can only be changed by the organisation and not by you or your bank. Consumers are protected by a scheme called the Direct Debit Guarantee, which ensures that any payments taken in error are required to be refunded immediately by the organisation.