Credit Cards How They Work

I was curious one day to find out how credit card work.
So instead of wondering about it I started looking around
for information. I checked the internet and the library.
Here's what I found.

The stripe on the back of a credit card is a magnetic
stripe. It is made of tiny magnetic iron based particles
in a plastic like film. Each particle is really a tiny
bar magnet about 20-millionths of an inch long. The
magstripe on the back of the card is very much like a
piece of cassette tape.

There are three tracks on the magstripe. Each track
is about one-tenth of an inch wide.
A magstripe reader can understand the information
on the three-track stripe. If the ATM isn't accepting
your card, your problem is probably either:
• A dirty or scratched magstripe
• An erased magstripe

The most common causes for erased magstripe are
exposure to magnets, like the small ones used to
hold notes and pictures on the fridge door and
exposure to a store's tag demagnetizer.

Your credit card typically uses only tracks one and
two. Track three is a read/write track (which includes
an encrypted PIN, country code, currency units and
amount authorized), but its usage is not standardized
among banks.

The information on track one is contained in two
formats: A, which is reserved for proprietary use of
the card issuer, and B, which includes the following:
• Start sentinel - one character
• Format code="B" - one character (alpha only)
• Primary account number - up to 19 characters
• Separator - one character
• Country code - three characters
• Name - two to 26 characters
• Separator - one character
• Expiration date or separator - four or one
characters
• Discretionary data - enough characters to fill
out maximum record length (79 characters total)
• End sentinel - one character
• Longitudinal redundancy check (LRC) - one character

LRC is a form of computed check character.

The format for track two, developed by the banking industry,
is as follows:
• Start sentinel - one character
• Primary account number - up to 19 characters
• Separator - one character
• Country code - three characters
• Expiration date or separator - four characters or
one character
• Discretionary data - enough characters to fill out
maximum record length (40 characters total)
• LRC - one character

There are three basic methods for determining whether your
credit card will pay for what you're charging:
• Merchants with few transactions each month do voice
authentication using a touch-tone phone.
• Electronic data capture (EDC) magstripe-card swipe
terminals are becoming more common -- so is swiping
your own card at the checkout.
• Virtual terminals on the Internet

This is how it works:

After you or the cashier swipes your credit card through
a reader, the EDC software at the point-of-sale (POS)
terminal dials a stored telephone number to call an
acquirer.

An acquirer is an organization that collects
credit-authentication requests from merchants and
provides the merchants with a payment guarantee.
When the acquirer company gets the credit-card
authentication request, it checks the transaction
for validity and the record on the magstripe for:
• Merchant ID
• Valid card number
• Expiration date
• Credit-card limit
• Card usage

The PIN is not on the card -- it is hidden in
code in a database. The PIN can be either in
the bank's computers in an encrypted form or
encrypted on the card itself. The transformation
used in this type of cryptography is called
one-way. This one-way information protects the
cardholder from being impersonated by someone
who has access to the bank's computer files.

Likewise, the communications between the ATM and
the bank's central computer are encrypted to prevent
would-be thieves from hacking into the phone lines
to record the signals sent to the ATM to authorize
the dispensing of cash and then feeding the same
signals to the ATM to trick it into unauthorized
dispensing of cash.

If this isn't enough protection to ease your mind,
there are now cards that utilize even more security
measures than your conventional credit card: Smart Cards.

I invite you to find out more about credit cards, or
to get a credit card, or to make money from credit cards at
http://www.ezleadcapture.com/member/heidi.htm