How Does the Magnetic Stripe on the Back of a Credit Card Work?

How Does the Magnetic Stripe on the Back of a Credit Card Work?
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The magnetic stripe on the back of your credit card stores data necessary to make a purchase. It will reveal your personal and bank data necessary to process your purchases, cash withdrawals and other everyday transactions. For merchants to validate that your credit card is good to cover the amount of your purchases, they will swipe it through a terminal that captures that data. The data is then transmitted for further verification by the issuing institution, in real time.

Nature of Magnetic Stripe

The magnetic stripe, often called a magstripe, comprises iron-based magnetic particles in a plastic film. The particles are actually very small bar magnets averaging 20-millionths of an inch in length. By magnetizing these particles in a north or south pole direction, the magstripe can be written with information in the same fashion as a piece of cassette tape.

Information Storage

The magstripe contains three tracks, each about one-tenth of an inch wide. The first track holds 79 alphanumeric characters that include your name, account number and the card's expiration date. The second holds 40 numeric characters and serves to augment track one, while the third, which is rarely used, allows 108 numeric characters. Credit cards typically use the first two tracks. The data along the magstripe is encoded as a series of ones and zeros that can be decoded by a card reader.

The Swipe

When your credit card is swiped through a reader, the electronic data capture, or EDC, software at the terminal will dial a telephone number via a modem to call an acquirer -- an entity that authenticates the card data and provides a payment guarantee to the merchant. The EDC transmits the merchant ID and data on the magstripe -- card number, expiration date, credit-card limit -- to the acquirer for validation. ATM cash withdrawals work differently; your PIN is not on the card -- it is encrypted in a database in the bank's computers, where it can be authenticated.

Malfunctions and Errors

There are times you may swipe your card and it doesn't work. This could be attributed to two causes: your credit card magnetic stripe has been erased, or it's dirty and/or scratched. Erasure typically stems from contact with, or exposure to, magnets. It's not possible for you to fix this, so you have to have the card replaced.