Does Your Bank Recycle Checking Account Numbers?

Identity theft, credit card debt, credit scores, credit report errors…we have a lot of things with which to concern ourselves in the world of credit and financial services.

We don’t need to keep adding more things to the already behemoth pile.

Unfortunately, that’s exactly what I’m about to do.

Now you have to worry about whether or not your bank has recycled your checking account number.

A New Kind of Check Fraud

A story broke last week about an elderly woman who was the victim of check fraud.

Nobody had stolen her checks and nobody had hacked into her checking account. Someone who had the same account number years before was still writing checks against the account despite the fact that he had closed it.

Think about it. If you have a checking account with a bank or credit union your checks have a routing number and an account number. The routing number is bank specific, so it doesn’t change.

One account number, if it’s the same on two different books of checks for two different consumers, will draw from the one account.

This is eerily similar to the issues of Y2K. Someone programming bank software didn’t have enough foresight to allow for the use of more or different numbers.

Point being, some banks don’t want to increase the number of digits in their account numbers because it’s expensive to do so. It’s easier to recycle old and unused numbers.

This presents problems, especially when you consider there are a finite number of permutations for account numbers.

I did the math and this is what it looks like;

5 digit account numbers = 81,000

6 digit account numbers = 810,000

7 digit account numbers = 8,100,000

8 digit account numbers = 81,000,000

NOTE: This is without leading or ending zeros

I personally have three different checking accounts, two personal and one business account. One of my personal accounts has a 5 digit account number. The other two have 8 digit account numbers.

What Do You Do?

You can’t force the bank to not re-issue a checking account number. So, you may already be using a checking account that has a recycled number.

Still, there are some things you can do to minimize your risk.

1. You can become much more engaged with your checking account.

This means checking transactions online frequently, which you should be doing anyways to help prevent or identify garden-variety check fraud.

2. Maintain low balances, which again you should be doing anyway.

You’ll earn more interest in something other than a checking account, so you should only have a few hundreds dollars on deposit at any time and transfer money from a money market when you need to clear checks or online payments.

Maintaining low balances will reduce your exposure

Good Checks Vs. Bad Checks

Some of you are probably wondering…what’s a check?

I’m only kidding, as most of you know what a check is, but it’s true that their usage is way down thanks to online bill pay.

But, while online bill pay is great, it does nothing to protect you from this recycling of account numbers practice.

Online bill pay still starts with a traditional deposit account, which has an account number, which may have been recycled.

Writing a check against an account you closed years ago is check fraud, plain and simple. Nobody accidentally writes a check against an account they know to be closed. It’s a conscious decision to do so.

It just looks like some fraudsters have gotten lucky and instead of writing a bad check, they’re actually writing a good check because it’s being honored by the bank.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.