ABA Number vs Routing Number
The American Banking Association has come up with a method to facilitate sorting, bundling and identification of checks and which financial institutions they’re drawn from. Without this sorting facility, there’ll be higher risks of inaccuracies and discrepancies In terms of cash flow. Erroneous, incomplete or mislaid routing information is the main cause in costing financial organizations and individual consumers considerable amount of money in overlooked ends. Given such implications, bank numbers have been essential in securing the seamless progression and rotation of funds throughout practically all sectors of the economy. There may be several codes and confusing numbers encoded in a single check but each one of these play an important role in validating a specific check. It is necessary for everybody to know the basics of bank numbering system and such errand can be simplified by identifying the different elements. Two of the ubiquitous codes are the ABA Transit Number or ABA Number and the Routing Transit Number (RTN) or Routing number. It is rather easy to distinguish one from the other base on the codes’ construction, length and location.
The ABA Number or ABA Transit Number is a numeric coding printed on a negotiable instrument in for of a check, facilitating check clearing among banks, may it be within a branch or an inter-bank transaction. The system is managed by the very organization the acronym ABA stands for, the American Bankers Association. It fundamentally assigns a unique identifier to each U.S. Financial institution. The ABA number is printed as the numerator (upper portion) of a fraction appearing at the upper right hand corner of a check; the denominator is the bank’s Check Routing Symbol which identifies the Federal Reserve Bank servicing that financial institution. An example of which is 12-34567/8901. The numerator, 12 in this case, is a two-part code that indicates the geographic location of the financial institution. The next part, 34567, signifies the bank or financial firm itself. Lastly, the denominator, 8901, points to the Federal Reserve Bank servicing the bank.
Another code is a nine-digit number called Routing Transit Number (RTN) or, simply, Routing Number. Like the ABA Transit Number, its purpose it to make it easy for banks to accurately sort and identify he financial institution on which a check is drawn. It is specifically designed to facilitate the classification and shipment of checks back to the payer’s (issuer’s) account. It provides a cheaper and more convenient alternative of transmitting electronic copies of checks as compared to sending the paper checks themselves. It is for the same reason that it is being highly utilized by Federal Reserve Banks and Automated Clearing House in transactions like wire fund transfers, direct deposits, bill payments, online banking, and other forms of automated transfers. It can be seen on the bottom part of checks. Composition-wise, the RTN is a combination of the bank identifier code and the Federal Reserve Bank identifier code as shown in the ABA Transit Number. Still using the example 12-34567/8901 as reference, the first four digits of the RTN, 8901, point to the Federal Reserve Bank, while the last five, 34567, pertains to the specific financial institution.
1) ABA Transit Number and Routing Transit Number are codes used to facilitate sorting, bundling and identification of a check and on where it is drawn.
2) The ABA Transit Number consists of three parts that refers to 1) the geographic location of the financial institution, 2) the bank itself, and 3) the Federal Reserve Bank servicing previous item. It is found at the upper right hand corner of a check.
3) The Routing Transit Number has two parts indicating 1) the Federal Reserve Bank and 2) the financial institution itself. It is located at the bottom portion of a check.