Faster Payments: What You Need To Know
The faster payments service speeds up the process of transferring money from one account to another, so it can be available in another bank account in a few hours.
Using faster payments means you no longer have to wait for money to clear before it can be spent and the whole system has made transferring money easier and quicker.
It can be used instead of another method such as a Bacs or CHAPS transfer and in many cases, payments will arrive immediately.
Here we explain everything you need to know about faster payments:
What are faster payments?
If you’ve ever needed to transfer money to another bank account quickly, you’ll probably have used faster payments. The system was set up in 2008 to make moving money around, and paying bills, quicker.
Instead of waiting for money to clear, and facing penalties for late payments because of this, faster payments allow customers of some UK banks to move money almost instantly.
They can be used for a variety of reasons, such as paying for a service or giving money to friends and family, and by using them there are no longer delays in the person receiving the money being able to access it.
How long do faster payments take?
Payments made via the service are usually available immediately. If you are transferring money to a builder for a new window, for example, they should be able to see the money in their account as soon as the payment has been made.
In some cases it can take up to two hours and some payments will take longer, such as those made outside of normal working hours.
All banks and building societies that allow faster payments have signed up to the Payment Services Directive and have to follow certain rules as created by the European Commission.
One of these is the time it takes for a faster payment to be made. While many payments are instant, there is a requirement that payments must be made by the end of the following business day at the very latest.
How do faster payments work?
Most payments will be made automatically via the faster payment scheme.
When you make a payment this way you’ll need to have the sort code and account number of the bank you’re transferring money into. Once logged onto your account, you can then send the amount of money to another account.
The recipient should then see the money in their account, either instantly or in a couple of hours, and can then use that money.
What are the rules when making a faster payment?
To make a faster payment your bank or building society needs to have signed up to the service along with the account you’re sending money too.
Most UK financial institutions are members and will accept these payments. In fact, less than 0.1% are not, according to the Faster Payments Service.
To check if a bank account will accept a faster payment, there is a free sort code checker on the Faster Payments Service website.
There is an overall limit of £250,000 for payments made this way, although banks and building societies set their own limits, which can be as low as £10,000. To check how much you can send, contact your bank or check its website for details.
How do you set up faster payments?
If you make a faster payment you don’t need to do anything differently. Most payments made with online, mobile, or telephone banking are made this way.
How much do faster payments cost?
You shouldn’t have to pay anything extra for making a faster payment, so long as it is within the transaction limit for your bank
What are the alternatives for transferring money quickly?
The two other most common payment systems are Bacs and CHAPs payments. Bacs payments may be used for regular payments – such as an employer paying its staff – and these typically take three days.
CHAPS offers same-day payments for larger sums, such as a house deposit, but you do have to pay a fee.
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Rebecca Goodman is a freelance journalist who has spent the past 10 years working across personal finance publications. Regularly writing for The Guardian, The Sun, The Telegraph, and The Independent. Read more