A short lesson about how U.S. financial institutions operate is necessary for a complete understanding of ACH numbers and their purpose. The Federal Reserve System, created in 1913, oversees the U.S. banking system and consists of 12 regional offices across the U.S. The purpose of the Federal Reserve is to "provide the nation with a safer, more flexible and more stable monetary and financial system," according to Federal Reserve Education.
The Federal Reserve is considered the nation's central bank. The American Bankers Association, or the ABA, is a private organization that has since 1875 represented the interests of banks and credit unions. The ABA functions like a professional or trade association in the banking industry.
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ABA Routing Number
The ABA routing number is a nine-digit number – beginning with 00 or 12 – that identifies the bank or credit union. These identifying numbers were established by ABA clearing house members in 1910 because so many banks had a problem agreeing on the process for distinguishing among the many banks (350 at the time the ABA was formed) the ABA represented. A year after the ABA clearinghouse members convened, the ABA assigned routing numbers to every bank.
Small banks may have just one ABA routing number; large banks may have several ABA routing numbers. For large banks, the first two digits of the routing number may denote the state in which the bank operates. Before a routing number is assigned or changed, it must have approval by the Routing Number Administrative Board and the ABA Executive Committee.
ACH Routing Number
Here's where it gets confusing: In some cases, the ABA routing number and the ACH routing number are different. While the ACH routing number is, in many cases, the same as the ABA routing number, its purpose differs from the ABA number.
The ACH number is an Automatic Clearing House number, meaning its purpose is to facilitate electronic funds transfers (EFT). For example, ACH numbers are used for depositing wages and expenses directly into an employee's bank account – many businesses use direct deposit for paying their workers. The federal government also uses direct deposit to send funds to an individual's account. In fact, one requirement for federal government employment is the ability to receive one's pay using a direct deposit. There's a provision for waiving this requirement but it must be approved by the head of the federal agency.
Private employers may offer their employees some flexibility when the employee does not have a bank account. Individuals can use an ACH number to pay for goods and services, particularly for payments for utilities, rent, mortgage and similar bill payments.
Bank Account Number
It's wise to protect your bank account number, but you cannot keep your bank's routing number a secret. Anyone can look up ABA routing numbers and determine whether the bank has a separate ACH number, but it's difficult to find an individual's bank account number.
If you still conduct banking via paper documents vs. electronic means, your checks and personalized deposit slips contain your bank routing number and your checking or savings account number. Your bank account number is the number assigned only to you and the joint account holder. To transfer funds, you need both the routing number and the account number. The order of these numbers is routing number on the left side of the check, followed by the bank account number. To the right of your account number is the check number. For deposit slips, the order is the same, but there's no check number.
- ABA: ABA Routing Number
- Federal Reserve System: Structure of the Federal Reserve System
- Federal Reserve Education: The Structure and Functions of the Federal Reserve System
- ABA: Introduction & Overview
- Cornell Law School: Legal Information Institute: 31 U.S. Code, Section 3332 - Required direct deposit
- ABA: ABA Routing Number Lookup