Bank Routing Numbers

Bank routing numbers are generally nine-digit codes - part of which identifies the financial institution in the United States. Most, if not all, banks will use routing numbers to direct funds to and from each other.

The routing number is often printed on the bottom left corner of a check which is the best place to start if you need it for some reason.

How important is a routing number to your finances, and how is it used? In this article, we'll take a look at the history of bank routing numbers, how they work and answer some of the most common questions people have when receiving and transferring money.

Bank routing numbers was a system created out of necessity by the American Bankers Association (ABA) in 1911. The goal for these new systems of digits was to streamline the circulation of paper checks by assigning unique identifiers the issuing bank.

The series of numbers is what's called ABA routing numbers, and may also be called American Clearing House (ACH) routing numbers.

Back in those days, the various banks were disagreeing on identification mechanisms. That led the ABA to arrange a meeting of all the clearing house managers in Chicago in the fall of 1910. The gathering resulted in the choice of a committee that would assign every bank in the country a series of numbers. The codes were then released in May 1911 by the American Bankers Association.

The numerical committee comprised of JA Walker, CR Mckay and WG Schroeder. Rand McNally was originally commissioned to publish the new directory. A closer inspection of the ABA clearing house codes shows that they work a lot like sub-headings.

The suffixes and prefixes usually stand for various essential aspects of the transaction, making it impossible to execute a successful transaction without them. Nearly 50% percent of the prefixes represent prominent cities, the other half represents regions in the US.

The higher the population, the lower the prefixes based on the 1910 census when it was first introduced.

Within every prefix area, the banks are numbered in order of the city's population and the seniority of the bank, with single bank towns numbered in alphabetical order. Each time a new bank is organized, the present publisher of the directory will assign a transit code to it.

The American Bankers Association has asked that banks use their directory exclusively so that they can agree on how checks should be sorted. The book was referred to as the Key to Numerical System of The American Bankers Association or Key in short.

The book was published by Rand McNally & Co, which later moved their corporate headquarters to Skokie, Illinois, in 1952. They then became more interested in maps.

Another company in Skokie called Accuity, which was the official registrar of the ABA bank routing numbers ever since 1911. Later in 2014, it published the semi-annual ABA key to Routing Numbers, owned by Reed Business Information, a UK-based publisher for reference works used by professionals.

Over the years, ABA identification figures for banks have been accommodated by the Federal Reserve Act, the Check 21 Act and Expenditure Funds Act. As of 2014, the Key now includes the US Federal Reserve's nine-digit magnetic ink routing code.

The use of these numbers helps to reduce the confusion associated with paper checks, which was a common form of payment back then. The numbers can be found on the bank's website, the ABA's database online and as mentioned earlier on a check.

The bank account number and your routing number is clearly displayed on the bottom of the check.

The majority of banks in the US provide clients with one check book for free; while that's beside the point, it is an important one because its where you'll find some essential information about the account, such as:

• The Routing Number: The bank routing number is a nine-digit code that's often printed on the bottom left side of the check. The numbers are printed in an odd font, using what's referred to as magnetic ink character recognition (MICR). The electronic ink allows banks to process these checks after swiftly verifying their authenticity.
• The Account Number: You should be able to find the account number printed on the bottom center of the check, to the right of where you'll see the routing number. Here too, the bank account number is a unique identifier for the bank account.
• The Check Number: To record all payments checks have an identifier on the bottom right.

Note: When you're providing a bank routing number with account numbers, it is essential that you double-check everything. Errors can often lead to failed transfers, or you can send the money to the wrong person, company or account.

If you do see an error, make sure to notify the bank so that the transaction can be reversed.

You might want to locate your bank routing number, and the checkbook may not be available. The good news is that you can still find it by checking the bank's website or calling the branch. It is important to note that the bank routing number will vary depending on your region and bank.

It isn't entirely unheard of for banks to have a multitude of routing numbers. That's why it is essential to confirm the routing number of a corresponding bank, i.e., where you've opened an account.

If you want to find the bank associated with a specific routing number, the ABA search website is a good place to start. You can also do a reverse search by entering the bank's name and address; it will show you its routing number.

There are incidences where you can receive checks that do not bear the name of the bank. The Federal Reserve will process transactions as long as there is a routing number and bank account number associated with it.

That's why you should protect your personal account number; some experts believe it should be as closely guarded as your social security number.

When sending money to, let's say, another business, all you need is to provide an ABA number and an account number. Billers, your employer, banks, possibly anyone who is setting up an automatic transfer will be able to handle the logistics.

If the bank fails or merges, you will get a new ABA number, but you might not have to start using them from that day onwards. Sometimes you can continue using the old number until the new check books arrive or sign up for new services. It isn't entirely out of the question if you want to use those old ABA routing numbers indefinitely.

So, how do they work? The ABA number is similar to an address that tells a bank which bank the money is destined for. That's why they are also referred to as RTNs or Routing Transit Numbers.

1. The initial four digits were at the beginning assigned by the Federal Reserve Routing System and will represent the physical location of the branch or bank. Since mergers and acquisitions aren't uncommon, these numbers may not always correlate with the latest geographical location of the bank.
2. The fifth and sixth digits helps to identify which of the Federal Reserve banks the wire transfers were routed through (and recorded).
3. The seventh digit is what's assigned to the Federal Reserve approved check processing facility.
4. The eighth digit mainly designates which Federal Reserve district that bank is located in.
5. The ninth digit mainly presents a checksum. Without going into intricate details about how a checksum works, we can say that it is a complicated mathematical expression that uses the initial eight digits. If the result does not equate to the checksum number, that transaction will be flagged and then rerouted to be processed manually. That makes forging checks potentially more difficult.

The ABA bank routing number has been instrumental in speeding up the processing of checks since the 1960s. However, as time passed things led up to the passing of the Check 21 Act in 2004, which meant that physical checks that travelled by plane or truck to reach banks could be electronically submitted and cleared.

As a result of passing the Check 21 Act, it became faster and easier to cash checks. Also, consumers were no longer required to pay the so-called "float" or issue a check a few days before they had the funds in their accounts.

The ABA routing numbers technically apply to paper checks; the ACH, on the other hand, applies to electronic funds transfers and withdrawals. Today, many financial institutions use the same routing numbers for both types of fund transfers.

That said, it isn't uncommon to see different ACH and ABA numbers depending on the region the institution is located in.

ABA routing numbers are often referred to as "check numbers" or "check routing numbers," and the ACH routing number at times referred to as "electronic routing number."

That way, if you cite only one number, it will most likely be the ABA and ACH routing numbers because they are generally considered one and the same but not always the same. However, you will always want to double-check with your bank if in doubt.

Usually, ACH transfers are automated electronic transfers that take place between financial institutions, conducted by a clearinghouse, which is a third party in this case. Wire transfers, on the other hand, are directly carried out electronically between financial institutions.

Wire transfers tend to be processed much sooner than ACH transfers since they don't require clearing through a third party. A wire transfer can take place and be completed within a few hours, at times even within minutes of when they are executed.

ACH transfers, on the other hand, can take a couple of days. Generally, wire transfers are considered more secure since each bank needs has to verify every transaction before clearing it. ACH transfers tend to be cleared automatically.

Banks will charge for wire transfers both for sending and receiving. ACH transfers, for the most part, are free. The reason behind this is that there is an added cost associated with wire transfers, and that's why they are best for essential purchases that involve large amounts or transfers where funds need to arrive on time. ACH transfers are best for everyday transactions.

SWIFT is an abbreviation for Society for Worldwide Interbank Financial Telecommunication. It is a series of numbers which helps to identify banks in an international transaction. It is similar to an ACH number or an ABA number in the way it identifies the bank in the US.

IBAN is an abbreviation for International Bank Account Number. The IBAN mainly identifies a personal account used in an international transaction. It is the same as a regular account number with just a few added digits in a format that's internationally recognized.

Take, for instance, if you want to send funds to a bank account in another country, you can enter their IBAN, which identifies their bank and account number.

IBAN and SWIFT are identical since they were developed to standardize the international identification system across all financial institutions.

Though we use the ABA routing system in the US for local transactions, American banks are set up to accept and send funds using the SWIFT system for across-the-border transactions.

The US is arguably the only country in the world that uses Routing Numbers, even when you need to receive money from a foreign bank. While the majority of countries continue to rely on IBANs for the banks to receive payment from abroad, the US requires a routing number.

That said, if you need to make a bank transfer to a US bank and from a US bank abroad, the routing number will still need to be provided so that the funds reach safely.

If you are receiving the money to a US bank account from someone located abroad, they will need to provide your routing number to their bank for the transaction to go through. However, the sender will also need your bank's SWIFT / BIC code.

It is one of the most common concerns people have when they start banking. While your bank routing number is sensitive information, it is also on every check that you write. So, it's freely available for anybody and any entity you write the check to.

If you are comfortable giving that person a check, it wouldn't be dangerous to give them your bank routing numbers. However, if you don't trust them or suspect something fishy, then, by all means, don't give them the bank routing number.

It isn't uncommon for bank routing numbers to be misused by unscrupulous businesses to take money out of people's accounts. That said, it is your responsibility to inform the bank right away if you notice suspicious withdrawals or transactions you didn't authorize.

Fraudsters can also create fake checks using your bank account number and routing number. Some fraudsters can order fake checks using all your bank information. The fraudulent checks can be used to pay for purchases, or the check can be cashed.

However, they will need to find a way to prove the check has been authorized for use by you, i.e., the account holder, which may require forging your signature.

The bank routing number helps in identifying the bank. If you use the wrong number, it could mean that you're depositing money in a different bank altogether. It is up to the bank to interpret the account number, but if its not the correct account number, it will show an error. That means your transaction will not go through.

Usually, the bank account will be invalid for that particular bank which the routing number may indicate, or some other information may not match, resulting in the transaction being rejected.

If the account number is considered valid at the bank, the deposit will be made to the account, and you would have sent money to a complete stranger. However, you can approach the bank to get things fixed, and the transaction can be reversed if the error is proven.

Generally, customers can call up their bank to check the routing number, or they can take a look at the bottom left side of their check. However, it is possible for a bank to have multiple routing numbers but not necessarily identical ones.

Large banks like Bank of America and even Wells Fargo will have a list of routing numbers for every state and sometimes multiple numbers for the very same state. The routing numbers are based on the branch where the customer may have opened an account.

Larger states or states where a bank may have many customers will have different routing numbers, which correspond to their varying use cases but all for the same bank. For instance, if a customer had a Bank of America account in Southern California, they could have 3 different routing numbers associated with the account.

Well, there are several situations in which you may be asked for the routing number. For instance, when paying for something by phone or online or signing up for automatic bill payments, it is imperative to provide your account number and bank routing number.

If you are processing checks or are maybe transferring money across the world, you will be asked to enter your routing number so that the banks know where the money should go. If you are not sure, the bank should be able to tell you which routing number to use.

At times, the routing number printed on checks may differ from what you need to execute a wire transfer; that's why looking them up online is a good way to avoid processing delays.