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4 Min. Read

What Is a Bank Transit Number?

What is a Bank Transit Number?

Your bank transit number serves to assist your bank in determining where checks and other financial documents came from. Also known as bank routing numbers, bank transit numbers have been used for more than a century. They are essential in helping financial institutions manage and keep track of transactions.

In this guide, we’re taking a closer look at bank transit numbers and the purposes they serve. As you will soon learn, these longstanding numbers play a vital role in banks and other financial institutions. Without them, you wouldn’t be able to deposit money or access your account.

With functions that exceed their initial purpose, bank transit numbers are a vital component of banking in the modern era.

Here’s What We’ll Cover:

Bank Transit Number: A Closer Look

Key Purposes of Bank Transit Numbers

Key Takeaways

Bank Transit Number: A Closer Look

Bank transit numbers and ABA routing numbers are one and the same. The nine-digit code helps identify the financial institution responsible for issuing the check. These numbers are typically located on the bottom left corner of checks.

The reason for these numbers is simple. When you cash a check from a party not affiliated with your bank, the transit numbers make it easy for your bank to tell which bank the check came from. Moreover, all financial institutions have their own unique bank transit numbers.

Such financial institutions include but aren’t limited to:

  • Commercial banks
  • Investment banks
  • Brokerage firms
  • Credit unions

What’s more, the bank routing number isn’t limited to checks. In fact, it is printed on every negotiable instrument that the bank in question issues. Such devices include but aren’t limited to:

  • Promissory notes
  • Bills of exchange
  • Paper checks

Keep in mind that routing transit numbers are specific to banks, not their clients. Therefore, if you and your spouse open separate checking accounts at one bank, you would have the same bank transit numbers.

Where your checks would differ, however, is in the number to the right of the bank transit number. The bottom right-hand number on checks is your account number. This number is unique to you and tells your bank where to deposit your money.

Key Purposes of Bank Transit Numbers

When bank transit numbers first appeared back in 1911, they served a singular purpose. That purpose was to help the few banks in the world identify one another. For example, let’s say you were given a personal check from someone who wasn’t a client at your bank branch.

When you took that personal check to your bank to have it cashed or deposited, your bank would run the check’s unique bank transit number. In doing so, they could tell which bank the check came from. This was essential in allowing them to employ funds transfers according to what was written on the check. And like today, your bank would use your account number to determine where to put your money.

Today, bank transit numbers serve different purposes. They are still used to identify other banks. But they are also used for things like:

  • Electronic transfers
  • ACH transactions
  • Online banking
  • Wire transfers

Do you get paid by direct deposits? You can thank your bank transit number for making that service possible. That’s because today’s electronic transfers still use bank transit numbers.

First, your bank uses your check’s bank transit number to identify which bank it came from. Once established, your bank uses your unique account number to deposit the funds into your bank account.

It’s safe to say that bank transit numbers are more important than ever in modern times. There are more than 80 banks in Canada alone, with tens of thousands more worldwide. What's more, many banks share similar names. So, bank transit numbers are all the more essential in identifying the various banking institutions.

Key Takeaways

There are numerous banks in the world today. As such, it is imperative to have bank transit numbers. These unique codes help banks everywhere identify other financial institutions. And when used in conjunction with your account number, your bank can quickly tell where to draw and deposit funds.

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