A routing number, sometimes also known as an American Bankers Association (ABA) routing number, is a nine-digit sequence of numbers that's used to identify and send funds to specific banking institutions in the U.S. By possessing an ABA routing number, a financial institution is recognized by the American Bankers Association and in turn the Federal Reserve and any other federal or state charters.
Routing numbers were first established by the ABA over a century ago. They were designed to ensure that paper checks were processed by and to the right financial institutions. Now, routing numbers have become an important tool in all types of banking activities.
Some banks can have multiple routing numbers. While small banks usually have just one, larger banks and financial institutions can possess several different routing numbers that refer to different regions, states, or uses. For example, banks sometimes have different routing numbers for wire transfers. In addition, after a merger, the merged bank may maintain both banks' routing numbers so customers don't have to update their bill pay or direct deposit.
Routing numbers are required to complete a range of banking-related tasks. These can include ordering new checks, paying bills, establishing a new direct deposit account either through the workplace or another setting, and sometimes paying taxes or receiving tax refunds from the IRS. You may also need your routing number to link your accounts at different banks or credit unions. Some online banking systems can now automatically connect your accounts, but many still use the old-fashioned method of entering your routing and account number then doing a test ACH transfer.
Routing transit numbers are not to be confused with domestic or international wire transfer numbers, which differ from routing numbers and are only used for specific wire transfers. To obtain a bank's wire transfer number, one must simply look online or contact the bank directly.
The first four digits of a routing number originally represented the physical location of a bank. But with how often banks change locations, merge with other banks, and are acquired, these numbers no longer always reflect a bank's current location in the U.S. However, when a new bank is formed, it will still get a routing number associated with the closest Federal Reserve Bank.
Currently, the first two digits of a routing number represent which Federal Reserve bank is routing a transaction, while the third digit represents which processing center in the Federal Reserve processes the transaction. Similarly, the fourth digit represents the Federal Reserve district where the bank is located.
The next four digits identify the specific bank. Finally, the ninth digit is generated by an equation known as a checksum involving the first eight digits and is used as added security for transactions. If the result of plugging the first eight digits into the equation isn't a final sum equaling the ninth digit, then the transaction is processed manually for security purposes.
Bank routing numbers can be found in multiple locations. One of the most commonly known spots to find your bank routing number is in the bottom left corner of your personal checks issued to you by your bank. The routing number is the first in a series of three numbers. The second set of numbers is the checking account number associated with the check, and the third is the specific check number. On certain variations of official checks, these numbers may appear in a different order. You can also usually see your routing number on your bank's website, through your bank’s mobile app, and your bank statements.
The numbers on the bottom of your checks aren't just for human eyes. They're printed with special magnetic ink, and processing equipment 'reads' this ink to process the account information associated with the check. Of course, with the rise of mobile banking and depositing checks online, the mobile app just reads the printed number using your phone's camera.
Working with checks is a delicate process, and one should always confirm the correct numbers before attempting to complete a transaction. For example, some checks are printed in a way that people can have trouble telling the bank account number and check routing number apart. Or, your bank might have multiple routing numbers. Verifying you're using the correct information when you order checks from a third party or set up an electronic funds transfer will help avoid headaches and bounced payments for both you and your recipient.
To understand the difference between a routing number and an account number, think of a mailing address. The routing number is the zip code and the account number is the street address.
A routing number gets a payment to a bank just like a zip code gets a letter to a post office. Using routing numbers makes it easier for banks to process transactions since any transaction using a specific routing number always goes to the same bank.
Once a bank has a transaction, it can then match it to a specific account at the bank using the account number. Account numbers are always unique at the same bank, but two people could have the same account number at different banks. It's just like how there can be a 123 Main Street in two different cities, but the post office knows which one to deliver to based on the zip code.
While routing numbers and account numbers are different, they work closely together to keep an individual's banking information secure and guarantee that transactions coming to or from their account go exactly where they belong. Almost any basic banking transaction requires both a routing number and an account number. Another way you can think about it is like an area code and phone number. If you're going to make long-distance calls (transfers to other banks), you need to use both the area code and phone number.
It's also important to note that anyone who wants to find the routing number for a specific bank can simply locate it online, but one's account number is extremely private and should be carefully protected, just like a Social Security Number or debit card's pin code. If a suspicious character knows which bank a victim holds an account at, all they would need to initiate transfers from the victim's account into their own is the account number—the rest of the information they could find with a quick web search.
Bill.com offers a safe and secure way to transfer money. You can input routing numbers and account numbers for secure ACH transfers. In addition, businesses and vendors can join the Bill.com network to transfer money without having to share their banking information. You'll also get access to several tools that help you save time in your accounts payable and accounts receivable processes. To see how it works, watch a demo or sign up for a risk-free trial. There's no credit card required to give it a try.
The content found here is for informational purposes only, and not for the purpose of providing advice, including but not limited to, financial, legal, or tax advice. Any opinion found here does not necessarily represent those of Bill.com.