Knowing Our Checks: Magnetic Ink Character Recognition

Back when banking was still an infant, checks written on accounts were sorted and sent from depository bank to drawee bank by hand. When they were received in the paying bank, they were charged against the account by hand - using the name on the check and the presenting bank to decide who to charge and who to credit.

We're a long way from that, now, when we electronically transfer funds between the depository bank and the drawee bank.

But most of our checks are still sorted and charged by means of the line of numbers across the bottom of the check. Those numbers were developed by the American Bankers Association in 1956, when they cooperated with the check printing firms, the equipment manufacturers, and other specialists to develop a machine-readable code. This group, called the ABA Bank Management Commission, introduced magnetic ink character recognition. Quickly dubbed MICR by the industry, that's what we call it today. (Whether you choose to call it "Mick-er" or "My-cur" is up to personal preference! Either is correct.)

Unique Number Design
Each number from 0 to 9 was designed to contain a certain, unique amount of magnetized particles in the ink. For this purpose, magnetic ink was developed that could be read directly by high-speed equipment. The way the numbers were designed meant they could not be mistaken for other information on the check, and they make it virtually impossible for the high speed equipment to misread. No number bears any mistakable qualities of any other. For instance, look at the heavy bottom on the "1" and the heavy line on the left of the "4".

Special Magnetic Ink
The magnetic ink and the special numbers are used nowhere else but on the bottom line of checks. The rest of a legitimate check is printed in regular ink. Magnetic ink can be procured by those wanting to produce fraudulent checks, and the ink can be used in personal printers. However, in most such attempts all of the printing is with magnetic ink. A device used to determine magnetic ink can uncover illicit and fraudulent attempts at reproducing legitimate checks by revealing all of the printing to be magnetized, instead of just the bottom line.

New Rules by Fed
After deciding the shape of the numbers, the ABA Commission then specified the placement of MICR information on all checks, and also required that all checks be within a specified size range, thereby ensuring there were none too small or too large to go through the high speed equipment.

By this time, instead of exchanging checks bank to bank, many financial institutions were using either the Federal Reserve or correspondent banks to handle their exchanges. So Fed issued a regulation that unencoded checks, and unusual non-standard size checks would no longer be accepted by Fed as cash items.

Required Encoding
The only coding absolutely required by Fed is the transit and routing number of the financial institution and the amount of the check.

The MICR encoded routing and transit combination contain nine digits. The first four are Fed's numbers. The first two are the Federal Reserve District where the drawee bank is located, the third identifies the Federal Reserve Office (head office or branch) and the fourth digit shows the drawee bank's state or special collection arrangement.

The second four digits are the drawee bank's special identifying number

The ninth digit is a verifying number. This number, combined with the first eight digits, verifies the routing number's accuracy and correctness.

This nine digit number, along with the amount of the check that is encoded by the teller or by proof and transit of the depositary bank on the right hand bottom of the check, are the only requirements of Fed. Banks needed more for their own bookkeeping procedures.

Other Information Encoded
All checks that we handle today now have the encoding required by Fed, and also the account numbers assigned by each individual bank so we can sort and charge more quickly when items are received.

Most also have the check numbers on the bottom MICR line so that the checks can be sorted by number before imaging or returning them to the customer.

All the numbers on the bottom line of the check, whether put there by the check printer or by the depositary bank, are in magnetic ink, and are the same unique numbers developed back in 1956 that are now standard in the United States, and much of the world.

Other Symbols
Around the numbers on the bottom of the check are symbols at the beginning and the end of each set of numbers. These are called "stop symbols" and are used by the computer to differentiate between the transit/routing number, the account number, the check number, and the amount.

The location of the amount of the check on the right hand side is important. Sometimes people attempting to counterfeit checks will produce them with a line all the way down on the bottom of the check, under the signature line, for an additional signature.

Perhaps they think if you see two signatures on the check you'll be more likely to accept it! When you discover a signature down where the amount will eventually be encoded, you have a strong clue the check you're looking at is a fraud. This is a common error for wanna-be counterfeiters and fraudulent check thieves, so be on the watch for it.

By utilizing the MICR line, a high-speed sorter-reader can handle well over 1000 checks per minute in-house, separating them into on-us items, a clearing house item (and then break down the clearing house checks by institution all in the same pass) , or a foreign (out-of-state) check. Foreign items are also called transit checks.

For those financial institutions so equipped, it can also send all the information to the paying bank electronically within minutes of the deposit.

Copyright © 2001 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 11, No. 9, 9/01