What Is a Routing Transit Number?

A routing transit number is a nine-digit number used to identify a bank or financial institution when clearing funds for electronic transfers or processing checks in the United States. The routing transit numbers–or routing numbers–are also used in online banking and clearinghouses for financial transactions. Only federal and state-chartered banks are issued routing transit numbers.

Key Takeaways

  • A routing transit number is a nine-digit number used to identify a bank or financial institution when clearing funds or processing checks.
  • The American Bankers Association (ABA) established ABA routing numbers in 1910.
  • The routing transit numbers–or routing numbers–are also used in online banking and clearinghouses for financial transactions.
  • Routing transit numbers are often used when setting up a wire transfer or direct deposit.

How Routing Transit Numbers Work

A bank's routing transit number is located at the bottom of a check and is the first nine digits on the far left. The first four digits of any routing number will designate the Federal Reserve Bank of the district where the institution is located. The next four digits denote the bank itself, while the last digit is a classifier for the check or negotiable instrument.

The numbers following the transit number on a check are the account number and check number for the bank from which the funds are to be drawn. All checks written on state or federally chartered banks will have check transit numbers on the bottom of their checks.

How Routing Transit Numbers are Used

Routing transit numbers are often used when setting up a wire transfer relationship with one's personal or business bank. A wire transfer is an electronic funds payment across a network administered by hundreds of banks worldwide. While no physical currency moves among financial institutions during a wire transfer, information does pass between banks, including the recipient's account information, the receiver's bank account number, and the amount of the transfer. As a result, a correct routing transit number is critical to ensure sensitive information is directed to the appropriate receiving party and that the transaction goes through smoothly.

Routing transit numbers are also involved in direct deposits of money from employers paying employees and income tax refunds from the Internal Revenue Service (IRS). A direct deposit allows a sender to deposit funds directly into the receiver’s bank account electronically, instead of a paper check.

Transit Number vs. Routing Number

There are a few terms that are used to describe routing numbers, including transit numbers and ABA numbers. ABA stands for the American Bankers Association, which established routing numbers in 1910. The terms–routing, transit, and ABA–are synonymous to each other and often used interchangeably. ABA routing numbers were originally established for checks but have since evolved to include identifying banks during electronic transactions as well.

Routing Transit Fraud

Before the invention of the internet and the widespread use of computers, check fraud was a major issue. Fraudsters could falsify a transit number on a check and attempt to cash the check at a local bank. Without the banks being on an interconnected computer system, it was difficult to verify check transit numbers leading to instances of fraud and theft.

Despite advancements in technology and improvements in security involving electronic transactions, fraud continues to be an issue for federal authorities. In January 2018 in Tennessee, a jury found citizens Keith Beane and Heather Ann Tucci-Jarraf guilty of money laundering. Also, Beane was found guilty of wire fraud.

Beane took advantage of automatic delays present in money transfers within the United States banking system to purchase certificates of deposit (CDs), using the U.S. Federal Reserve’s routing number. Coupled with a fake checking account number, Bean quickly liquidated the CDs and placed the new funds in his USAA accounts. He withdrew these funds immediately, prior to the transaction being approved.

With this ploy, he was able to open $30 million in CDs prior to the USAA realizing the fraud. Beane paid off debts and purchased a $500,000 motor home, according to prosecutors. The routing transit number of the U.S. Federal Reserve was key in allowing him to pull off the financial stunt.