Key takeaways
- Bacs Direct Credit is the most common UK method for regular bank payments, and around eight in ten Brits have their salaries paid this way.
- Bacs was introduced in 1968, is operated by Pay.UK, and runs Monday to Friday between 07.00 and 22.30.
- Settlement takes up to three business days, with a typical fee of £0.05 to £0.50 per payment and a £20 million maximum.
- Compared with cash and cheques, Direct Credit allows automated remittance and reconciliation and simpler cash flow forecasting.
Introduction to Bacs Direct Credit
Bacs Direct Credit is the most common payment method for regular bank payments in the UK, and is what would be commonly known as 'a bank transfer' by the general public. Around eight in ten Brits have their salaries paid through Bacs Direct Credit.
Bacs stands for Bankers' Automated Clearing System. It refers to the network of banks and building societies that participate in the Bacs payments schemes. To learn more about Bacs Direct Credit and other UK payment schemes, see our deep-dive on UK bank payments.
- Year introduced: 1968
- Operated by: Bacs (now part of Pay.UK)
- Maximum amount: £20 million per payment (may vary by bank)
- Availability: Monday to Friday between 07.00 and 22.30
- Settlement: Up to three business days
- Fee per payment: £0.05–0.50
How Bacs Direct Credit works
Bacs Direct Credit allows businesses of any size to make payments directly into the accounts of another bank or payment service providers (PSPs) with a three-day settlement period. Around 8 in 10 Brits have their salaries paid through Direct Credit and it’s the most common payment method for regular payments.
Compared to handling paper money like cash and cheques, Bacs Direct Credit is much easier for businesses to manage. Remittance and reconciliation can be automated, there are fewer security requirements, and the regular settlement cycle simplifies cash flow forecasting to some extent.
Credit transfers through Direct Credit can be submitted up to 30 days in advance of the desired payment date, making it well-suited for regular, scheduled payments like salaries. Payments can also be recalled after submission if the bank or PSP is notified before the cut-off time.
Processing cycle
- Day 1: Payment files are transmitted to Bacs between 07.00 and 22.30
- Day 2: The files are delivered to the recipient's bank for processing
- Day 3: The funds are credited to the recipients' accounts and debited from the payer's account
Benefits and drawbacks of Bacs Direct Credit
Bacs Direct Credit is available to any business with a UK bank account and it offers a comparatively low fee per payment. It is also relatively easy to administer since both the remittance and reconciliation can be automated.
Conversely, Bacs Direct Credit is not suitable for immediate or same-day payments due to the three-day settlement period with strict cut-off times. As a push-based payment method, it relies on the payer taking action (unlike Bacs Direct Debit).
