How are Account Numbers Generated and Distributed?

routing number

Every bank account has its unique number, but do you know what those numbers mean? Do you know how institutions create these numbers? Today, we will learn more about bank account numbers.

Account Numbers Explained

In the ongoing debate of routing number vs. account number, we often refer to different types of accounts as if they’re the same. However, this couldn’t be further from the truth. For example, one of these numbers identifies your account and its corresponding branch or branch system. This ensures that your money goes directly to the right place when you send it electronically. But what’s in a number? What purpose does it serve, and how did it come to be? Read on to learn more about this ubiquitous piece of information in today’s world of commerce.

Your financial institution assigns account numbers. Institutions generate them by using an algorithm based on information they know about you, such as your name and date of birth. These algorithms can be so complex that they may change every time you open a new account with that institution.

Each bank has its system for generating and distributing these identifiers, but they contain similar information.

That includes:

The First Two Digits

According to the experts at SoFi, “There are 12 Federal Reserve Districts, and each district has its bank.” The first two digits of your account number tell you which Federal Reserve District your bank resides in. For example, if your account number starts with 09, your bank is in New York. If it begins with 08, your bank is in Minneapolis-St. Paul.

The Third Digit

The third digit refers to an individual branch within each district. A range of 03-09 is assigned to U.S.-chartered banks, savings associations, and credit unions.

The Fourth Digit

The fourth digit indicates which Federal Reserve Bank is responsible for handling transactions and maintaining balances on behalf of that bank. The number 0 indicates that the bank’s location is one of twelve Federal Reserve Districts. These districts are divided based on states and contain multiple banks. Therefore, they use numbers 1-9 to designate their location within those districts.

Digits Five Through Eight

The American Bankers Association assigns an identity code and digits five through eight comprise that unique identity code.

The Final Digit

We refer to this number as the check digit. The check digit helps to verify the authenticity of an account number. Institutions do this by adding all the digits, then taking the last digit and multiplying it by 2. Then you add it back into the original sum. If there are no errors, the check digit will be 10 or 9. The number of digits depends on whether there are an odd or even amount of digits.

When we’re thinking about our accounts, their account numbers, and why they matter to us, it is vital to think beyond their practical uses. Account numbers are more than just random strings of digits, and they can tell a story all on their own. You can find more information on account numbers and SoFI Invest (SoFi Bank).