This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
CHAPS (Clearing House Automated Payment System) is the UK's same-day high-value payment system. The system is used for transactions that need to settle on the same day (typically property purchases, large invoice payments, and high-value transfers between financial institutions). Many brokers that operate in the UK accept CHAPS as a funding method, and the settlement is instant (the funds arrive in the broker's account on the same day).
The use case for CHAPS in stock trading is a large account where the trader wants the funds to arrive and be available for trading on the same day. The alternative (a standard bank transfer, BACS) takes 1-3 business days. The trader who is time-sensitive uses CHAPS; the trader who is cost-sensitive uses a standard transfer or a debit card.
How CHAPS works
The trader sends a payment from the trader's bank account to the broker's bank account, using the CHAPS system. The trader must provide the broker's sort code, account number, and reference (the account number or the trader's name). The payment is processed on the same day if it is initiated before the CHAPS cut-off time (usually 3-4pm UK time, depending on the sender's bank).
The funds are available in the broker's account on the same day, and the broker credits the trading account on the same day. The broker may also accept CHAPS payments from non-UK banks through the SWIFT-CHAPS link, and the settlement takes 1-2 business days for an international transfer.
The cost of CHAPS
The cost of a CHAPS payment is set by the sender's bank, and it is usually £10-£30 per payment. Some banks offer free CHAPS payments for premium account holders, and some brokers reimburse the CHAPS fee for large deposits. The broker may also charge a fee for receiving CHAPS payments, typically £5-£15, and the trader should check the broker's funding fee schedule before making a payment.
The cost is meaningful for a small deposit (a £1,000 deposit with a £25 CHAPS fee is a 2.5% entry cost) and acceptable for a large deposit. The trader should compare the CHAPS fee with the opportunity cost of having the funds in transit for 1-3 days on a standard transfer, and the trader should decide based on the account size and the trading urgency.
The alternative funding methods
The most common alternative is a standard bank transfer (BACS in the UK, SEPA in the EU, ACH in the US). The transfer is free (or cheap, €0.01-€1) and takes 1-3 business days. The transfer is the right choice for a non-urgent deposit and for a trader who wants to avoid the CHAPS fee.
A second alternative is a debit card or a credit card payment. The card payment is instant, and the broker may charge a fee (1-3% of the deposit amount). The fee is higher than CHAPS for a large deposit and lower than CHAPS for a small deposit. The debit card is the right choice for a small deposit (€100-€2,000).
A third alternative is a digital wallet (PayPal, Skrill, Neteller). The wallet payment is instant, and the broker may charge a fee (1-3% of the deposit amount). The wallet is the right choice for a trader who is already using the wallet for other purposes and does not need the regulatory protection of a bank transfer.
What to check before using CHAPS
The trader should check the broker's accepted funding methods, the broker's CHAPS fee, the broker's sort code and account number, and the reference for the payment. The trader should also check the sender's bank's CHAPS fee and the cut-off time for same-day settlement.
The trader should also check the broker's withdrawal policy. Some brokers restrict withdrawal to the original funding method (the funds must be returned to the CHAPS account they came from), and some brokers allow withdrawal to any bank account. The restriction matters if the trader plans to use CHAPS for the initial deposit and a different method for withdrawal.
Common questions about CHAPS funding
Is CHAPS available for international transfers? CHAPS is a UK domestic system. For international transfers, the trader can use SWIFT or SWIFT-CHAPS link. The international transfer takes 1-3 business days, and the fee is £15-£40 depending on the sending bank.
Can I withdraw funds via CHAPS? Most brokers allow withdrawal via CHAPS, but the broker may charge a fee for the withdrawal (typically £10-£25). The trader should check the broker's withdrawal policy before assuming that the same method is available for both directions.
What happens if the CHAPS payment fails? If the payment is rejected by the broker (wrong sort code, wrong account number, wrong reference), the funds are returned to the sender's account within 1-3 business days. The sender's bank may charge a fee for the failed payment.
Related resources
Where to start
If you are evaluating CHAPS as a funding method, the most useful first step is to check the broker's accepted payment methods, the CHAPS fee at the broker and at your bank, and the cut-off time for same-day settlement. Our broker comparison lists the deposit and withdrawal methods at each broker, which together tell you what the funding options look like before you set up the account.