ACH routing numbers explained: What they are and why they’re so important

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  1. 导言
  2. What does ACH stand for?
  3. History of ACH routing numbers
  4. What are ACH routing numbers used for?
  5. How can you find an ACH routing number?
  6. ABA vs. ACH routing numbers

An ACH routing number is a nine-digit code that banks and financial institutions use to identify the specific facility responsible for the payment and transfer of money between accounts within the United States. Like a home address, an ACH routing number directs electronically transferred funds to the correct bank and branch. The number is necessary for setting up direct deposits, automatic payments, and wire transfers. Each bank or credit union has a unique code. You can find this code in multiple ways: by checking the bottom of a check from the institution, by searching for it on the bank’s online banking systems, or by contacting the bank directly.

For businesses, understanding ACH routing numbers is key: when you’re sending or receiving payments via ACH, you need to know the correct routing number to ensure the funds reach the right bank account. In the third quarter of 2023, the ACH network saw a total volume of 7.8 billion payments—an increase of 3% from the same period the previous year—which signals that the already strong demand for ACH payments is growing.

Having a firm grasp on routing numbers is especially important for businesses that manage payroll, pay suppliers, or handle direct deposits from customers. A mix-up can lead to delayed payments, which disrupt operations and potentially damage vendor relationships. Understanding the importance of ACH routing numbers lets you keep the wheels of your business turning smoothly. Here’s what you should know.

What’s in this article?

  • What does ACH stand for?
  • History of ACH routing numbers
  • What are ACH routing numbers used for?
  • How can you find an ACH routing number?
  • ABA vs. ACH routing numbers

What does ACH stand for?

ACH stands for Automated Clearing House, which is a network used to move money and information electronically between banks and financial institutions within the United States.

History of ACH routing numbers

The system for ACH routing numbers began when the banking industry started to automate and organize the processing of checks and other financial transactions more effectively in the 20th century. The American Bankers Association (ABA) created the ACH routing number system in 1910 to facilitate the sorting, bundling, and shipment of paper checks. As electronic transactions became more common, the system was adapted for use in electronically processing funds.

ACH routing numbers have nine digits, each of which serves a specific purpose. The first two digits indicate the Federal Reserve Bank district where the institution is located. The second pair of digits are the Federal Reserve Bank’s district branch—or processing center—assigned to the bank. The fifth, sixth, seventh, and eighth digits represent the institution’s unique identifier within its Federal Reserve district. The final digit is a checksum, which is a mathematical sum used to verify that the first eight digits are correct.

As electronic payments increased in popularity, the ACH network expanded. The routing number system became a way to process these payments efficiently, allowing institutions to transfer funds back and forth in an accurate and direct way—without needing to physically transport paper documents. Over time, the use of ACH transfers has grown to include a wide variety of payment services, such as direct deposit of paychecks, automatic mortgage and bill payments, and government and business transactions. The ACH network processes large volumes of credit and debit transactions, which include direct deposits as well as direct payments.

The reliability and organized structure of the ACH routing number system have supported the expansion of electronic money transfers, contributing to the shift toward a paperless financial system. As the volume of digital transactions continues to rise, routing numbers play an increasingly important role in the daily operations of financial services.

What are ACH routing numbers used for?

These nine-digit numbers are key to how electronic funds transfers work in many markets. They’re used in different ways to direct funds to the correct financial institution. Here are some of the main uses for ACH routing numbers:

  • Employers use them for direct deposit, in order to deposit salaries into employees’ bank accounts.
  • Individuals and businesses use them to set up scheduled payments for loans or bills.
  • They are used to facilitate the transfer of funds between different bank accounts—both personal accounts and business accounts.
  • Utility companies rely on them for receiving monthly payments from customers.
  • They are used for sending and receiving state and federal tax payments and refunds.
  • Businesses and nonprofits use them to receive contributions or payments for services rendered.

In each case, ACH routing numbers help guarantee that the correct parties send and receive the funds in an organized and timely manner.

How can you find an ACH routing number?

There are several methods for locating an ACH routing number:

  • Check the bottom of a check associated with the account. Traditionally, the first set of numbers printed on the left side is the routing number.
  • Look at a bank statement. Some banks include the routing number on statements.
  • Log into the financial institution’s online banking platform or mobile app. Typically, the routing number is listed in the account information or account settings section.
  • Visit the bank’s website. Most banks have an FAQ section or a dedicated page where they list their routing number.
  • Call the bank. A representative can provide the routing number after verifying the account holder’s identity.
  • Use the official American Bankers Association routing number lookup tool. This is accessible to anyone who needs to find or verify a routing number.
  • For credit unions, the routing number can usually be found by visiting the website or by calling customer service for assistance.

Some financial institutions have several routing numbers that serve different purposes or regions. It’s important to use the correct routing number to avoid any delays.

ABA vs. ACH routing numbers

While both ABA and ACH routing numbers facilitate payment processing, they are used for different types of transactions.

ABA routing numbers—also known as routing transit numbers (RTN)—were originally designed to facilitate the sorting, bundling, and shipping of paper checks. They are still used today for the clearing of physical checks and for wire transfers. These numbers can be found on the bottom left side of paper checks.

ACH routing numbers are used only for electronic transfers and payments. For some banks, the ACH and ABA routing numbers are the same, but other banks have separate numbers specifically for ACH transactions. This differentiation helps institutions to route the transactions through the correct processing systems—whether for direct deposit, bill payment, or other automated transfers. Using the wrong number can lead to delayed or failed transactions.

To determine the appropriate number for a transaction, you can refer to the bank’s website or contact its customer service. For ACH transactions, make sure you ask for the ACH routing number specifically to avoid any confusion or mistakes in the transfer process.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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