The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
What is a Routing Number?
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In Canada, your routing number is a combination of the 5-digit branch number and the 3-digit financial institution number that can be found on the bottom of your personal cheques. In the U.S. a routing number is a nine-digit number. A routing number identifies your bank or financial institution in a monetary transaction. Chances are, a past employer has asked for your routing number for your direct deposit or you’ve seen a routing number on one of your cheques or bank statements. Routing numbers were implemented in 1910 to make transactions more efficient and rapid, and they have successfully done that. The idea is that if every bank has a unique number assigned to it, miscommunication and errors would be reduced.
Routing numbers are becoming more and more relevant to Canadians since electronic banking has become common in everyday life. To learn more about routing numbers, continue reading below.
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Where Do I Find a Routing Number?
Routing numbers can be found in various places. The most common place to find a routing number is at the bottom of your personal cheques. The numbers at the bottom are your routing number, account number, and cheque number, in that exact order. If you don’t use cheques, you can also find your routing number on your bank statement, deposit slips, on your bank’s website or by contacting your bank by phone or in person.
When Would I Use a Routing Number?
Using a routing number is more common than you would think. In fact, you’ve probably utilized your routing number before without even knowing it. Moments, where you can expect to use your routing number, include:
- Direct deposit set up with your employer
- Automatic, recurring loan and bill payments
- Direct deposit set up with the CRA for tax refunds or payments
- Transfers between two bank accounts
- Wire transfers
Routing numbers are only required when dealing with transactions coming or going directly from your bank account. Debit and credit card purchases do not require the use of routing numbers, as an example.
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Do Routing Numbers Ever Change?
Routing numbers can change from time to time. Changes arise when financial institutions close branches, change the routing number’s purpose, restructure their operations, or incurs a merger, acquisition or consolidation. When any of these events happen, the routing number attached to your account can change.
If your bank account routing number changes, you will likely receive correspondence from your bank notifying you of the change ahead of time. More often than not, you can still use your old personal cheques when a routing number changes because the old routing number will still be connected with your account. If your bank asks you to stop using your old cheques due to a changed routing number, feel free to ask them for a new set of cheques free of charge.
While making sure your cheques are shorted is an important part of dealing with a changed routing number. Another thing to be concerned with are alterations to your recurring automatic transactions. To avoid complications with your payments to vendors, be sure to update the transaction details in relation to the routing number. You will also want to update the information with people who are sending you money, such as your employer via a direct deposit. Keep an eye out for missed payments or deposits while the routing number transition is happening.
Routing numbers were invented to make electronic banking easier and faster, and that is exactly what they do. You get your paycheque from your employer faster, can pay vendors from the comfort of your home and can set up automatic payments so you don’t need to worry about them.
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