What it means
When money moves from one bank to another, the system needs to know exactly which institution to send it to. The routing transit number answers that question.
Combined with the account number, which identifies the customer at that institution, it gives the full address of an account. The number is nine digits long.
The first four digits identify the Federal Reserve district and processing details, the next four identify the specific institution, and the last digit is a check digit that helps catch typing errors. Large banks may have several routing numbers, for example for different regions or for wire transfers compared with automated clearing house (ACH) payments.
Businesses use routing numbers every day. A payroll team needs an employee's routing number and account number to set up direct deposit, a finance team uses them to pay suppliers by ACH or wire, and customers use them to pay invoices by bank transfer.
Getting one digit wrong can delay a payment or send it to the wrong place. The check digit allows a simple test.
By multiplying each digit by a repeating pattern of weights of 3, 7 and 1 and adding the results, a valid number always gives a total that divides evenly by 10. This catches most typing mistakes, although it cannot confirm that the account really exists.
Routing numbers are not the same as other bank codes. International payments use SWIFT or BIC codes and IBANs, and other countries have their own systems, such as sort codes in the United Kingdom or transit numbers in Canada.
Finance teams making cross-border payments should know which code each country uses. Because the routing number is printed on cheques, it is not secret.
However, combined with an account number, it can be used to request payments, so businesses should store the details securely and verify any request to change bank details by calling a known contact.
In practice
Real-world examples.
Example
A small business hires a new employee and asks for her bank details for direct deposit. The payroll clerk enters the routing number and account number from her voided cheque. The system checks the check digit and accepts the number.
Example
A construction company receives an email, apparently from a supplier, asking it to change the bank details for future payments. The accounts payable manager phones the supplier on a known number before changing the routing and account numbers. The call reveals that the email was fraudulent.
Example
A software firm sets up bank transfer as a payment option on its invoices. It prints the routing number for ACH payments and a separate one for wires, because its bank uses different numbers. Customers who use the wrong one see delays of a day or more.
Formula
Calculation
Check: 3 x (d1 + d4 + d7) + 7 x (d2 + d5 + d8) + 1 x (d3 + d6 + d9) must be divisible by 10
Take the fictional number 123456780, which is used only for illustration. The digits d1 to d9 are 1, 2, 3, 4, 5, 6, 7, 8, 0. First group: 3 x (1 + 4 + 7) = 3 x 12 = 36. Second group: 7 x (2 + 5 + 8) = 7 x 15 = 105. Third group: 1 x (3 + 6 + 0) = 9. The total is 36 + 105 + 9 = 150, which divides evenly by 10, so the number passes the check.Case study
Seen in the real world.
Tamarind Wholesale is an illustrative, fictional distributor that pays about 300 suppliers by ACH each month. A clerk typed one supplier's routing number with two digits swapped, and a $48,000 payment was rejected by the bank after three days.
The supplier chased the payment, and the late fee clause in the contract added $480. The finance manager decided to add a check digit validation to the vendor setup screen.
After the change, invalid numbers were rejected on entry, and no further payments were returned for that reason. The illustrative lesson is that a simple built-in check can save time, money and supplier goodwill.
Watch out
Common mistakes.
- Using the routing number from a bank's wire instructions for ACH payments, when the two can be different.
- Assuming a number that passes the check digit test belongs to a real, active institution.
- Changing a supplier's bank details after an email request without independent confirmation.
Questions
People also ask.
Where do I find my routing number?
It is printed on the bottom of your cheques, and your bank's website or online banking pages also show it.
Is the routing number the same as the account number?
No, the routing number identifies the bank, while the account number identifies your account at that bank.
Do other countries use routing transit numbers?
The term is American, but other countries have equivalents such as sort codes, SWIFT codes and IBANs.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related