Although you may have heard the expression “to make a Bacs payment”, Bacs is actually the central payment system used to process several different types of electronic payment. The vast majority of Bacs payments are Direct Debits or Direct Credits (used by companies to pay individuals salaries, pensions, state benefits and tax credits).
Until the introduction of Faster Payments, Bacs was also used to process one-off internet and phone payments and standing order payments. However, as Faster Payments enables these payments to be processed almost instantaneously, 24 hours a day, seven days a week it is now the default system and is used for the vast majority of these types of payment.
What would I use this for?
- All your Direct Debits and regular payments from businesses into your account such as wages, pensions, state benefits and tax credits will automatically be processed via Bacs.
- Nowadays it is much less likely that any other electronic or automated payments you make (such any one-off phone and internet payments or standing orders) will be processed through Bacs. This is because it takes three working days for these payments to be processed via Bacs whereas Faster Payments, which was launched in 2008, is an almost instantaneous system which is available seven days a week and 24 hours a day.
- Not all accounts (for instance some saving accounts or deposit accounts) enable you to send Faster Payments. You can check to see whether the sort code of the account you have is set up for Faster Payments on this sortcode checker.
How do I use it?
- Your Direct Debits will be automatically directed through Bacs so you don’t need to do anything.
- If you want to transfer money out of an account (such as a savings account) which doesn’t allow Faster Payments using phone or internet banking it will automatically be processed via Bacs. This means that if you make the payment on a Monday it will arrive in the destination account on the Wednesday. If timescales are important for a payment you should check with your bank before making the payment.
- The Bacs central system itself is extremely secure, and there are lots of layers of security built into the processes that banks and businesses use to process payments through Bacs.
- From a customer’s perspective – the security you see will depend on the type of payment you make. For instance only approved businesses are allowed to collect Direct Debits and in the event that anything goes wrong, as a customer you get excellent protection thanks to the Direct Debit Guarantee. Full details can be found on the Bacs website
- Regardless of the type of electronic payment, you enjoy the same level of protection. This means if you are an innocent victim of fraud that is the result of an ‘unauthorised transaction’, you can expect an immediate refund. An unauthorised transaction is a payment from an account which has taken place without the permission of the account holder. This can include transactions that are the result of a fraudster gaining unauthorised access to a customer’s account, but does not include any payments that the customer has authorised themselves. Your claim needs to be made within the 13 months of the fraudulent transaction leaving your account.
- Payments require your authorisation in advance and your bank must tell you what information the payment will be processed on (e.g. account number and sort code). If you give the correct information and your payment goes as a result of an error by your bank, they must refund you immediately. The latest enhancements mean that where there is clear evidence of a genuine mistake, the receiving bank will prevent the money being mistakenly spent by the recipient of the payment. Although the improvements cannot guarantee a customer will get their money back, they mean that, for the first time, in straightforward cases where the recipient does not dispute the return of the funds, the money will be returned within 20 working days.
- When you set up an electronic or automated payment from your account it is vital that you give the correct sort code and account number and name of the person/business you want to pay. If you give incorrect details your money may end up in someone else’s account and it may be difficult to get it back.
- If your payment goes astray as a result of a mistake you have made (for example, by using the wrong sort code or account number) your bank must assist you in tracing the funds.
- If you want to make a payment that is time-critical you should check with your bank which options are available from your account. Most Faster Payments are processed almost instantaneously, and the system is generally free to use, but the exact speed of payment can depend on which bank you are sending from or to. If you require added certainty that a payment will be processed on the same day, ask your bank about the CHAPS service – it is available during Monday – Friday during business hours, and can process payments of any amount, but you will generally be charged a fee for using CHAPS
- Useful website: www.bacs.co.uk