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What Is BACS? Beginner’s Guide to BACS Payment

By Lulu Meade

We’re coming back atcha with some more fun acronyms- this time discussing the ins and outs of BACS payments, enjoy!

Bacs Meaning and what they’re used for

Bacs payments are Bankers Automated Clearing Service, which is the most popular method for business payments in the UK, by like, a lot. (maybe add a fact on how many people use it)

Bacs allows for regular and scheduled payments, which is why they’re often used to pay salaries and state benefits. The payments do take three working days to process though, unlike the same day delivery of the CHAPS system.

Types of BACS: Direct Debit vs BACS Direct Credit

There are two types of bacs payment you need to know about- Direct Debit and Direct Credit.

Direct Debit is your best bet if you’re planning on taking payments- because of the guarantees, BACS direct debit is one of the safest methods of making payments in the UK. Direct Debit BACS are great for subscriptions and bills- regular payments a consumer can authorise your business to take out of their account.

Direct Credit is used by business to make payments- like the salaries and state benefits mentioned above. Using a BACS Direct Credit system in those circumstances saves money and time and allows for greater cash-flow control when compared to sending out cheques.

What is a Bacs Service User Number?

A BACS Service User Number, or SUN, is a six-digit number used to identify a business transferring money and is needed for any BACS communications. So, for a business to receive money from a BACS, they’ll need to get their hands on a SUN which they can either apply for themselves or use via a third-party.

How long does a Bacs payment take?

Bacs payments can take three working days to deliver and follow a pretty clear process. On day one, payments are submitted, day two the payments are processed by the bank and on the third day the payment is credited to the recipient.

Alternatives to Bacs Payment:

There are a few alternatives to a BACS payment. The main one is a CHAPS payment, although they can cost up to £35. BACS payments are far cheaper than CHAPS payments (read more about those here), only costing around 23p per transaction. Unlike CHAPS, however, there is an upper limit for transactions of £250,000.

We hope that answered any questions you may have had about BACS payments- if you want to find out more check out our post on CHAPS payments!

If you’re looking for better ways to monitor your payments and spending and take control of your budgeting check out the free Nova app. Start your financial journey now!

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