What is the purpose of a routing number?

What is the purpose of a routing number?

• A. To identify the account holder
• B. To identify the specific transaction type
• C. To identify the bank that holds the account
• D. To validate a debit card

Answer: (C)

The purpose of a routing number is to identify the specific bank that holds an account. Each bank in the United States is assigned a unique routing number by the American Bankers Association (ABA), which helps ensure that payments are directed to the correct financial institution during transactions such as electronic payments, wire transfers, and check processing. This number is crucial in the banking system because it allows for the accurate routing of funds, ensuring that money is transferred securely and efficiently between banks. For example, when a person makes a payment or a direct deposit, the routing number indicates the originating or receiving bank, which is essential for ensuring that the transaction is executed correctly. While account holder identification, transaction type specification, and debit card validation are important aspects of banking and finance, they fall under different functionalities. The routing number specifically pertains to the bank's identification, making it essential for the processing of transactions between financial institutions.

The purpose of a routing number is to identify the specific bank that holds an account. Each bank in the United States is assigned a unique routing number by the American Bankers Association (ABA), which helps ensure that payments are directed to the correct financial institution during transactions such as electronic payments, wire transfers, and check processing.

This number is crucial in the banking system because it allows for the accurate routing of funds, ensuring that money is transferred securely and efficiently between banks. For example, when a person makes a payment or a direct deposit, the routing number indicates the originating or receiving bank, which is essential for ensuring that the transaction is executed correctly.

While account holder identification, transaction type specification, and debit card validation are important aspects of banking and finance, they fall under different functionalities. The routing number specifically pertains to the bank's identification, making it essential for the processing of transactions between financial institutions.