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

Credit Card Problems

Credit Card Billing Problems
Credit card account users encounter two types of problems:

· errors on the billing
· insufficient notice before a bill is due, and 2) errors on the bill.

Errors
The Fair Credit Billing Act provides specific protection for consumers
who have billing problems. It defines billing errors as:

1. Your payment has not been credited to your account.
2. Purchases that you just have a question about.
3. An incorrect amount charged or a charge for something that you
did not accept.
4. Charges made by an unauthorized person
5. Credit department mistakes.
6. Finance charges added to your bill for late payment when your
bill was not sent to your current address (provided you notified
the company of your address change prior to the end of the
billing period).

Insufficient notice.

If your account allows you to avoid a finance charge by
paying your account in full by a certain date, the company
must mail its billing at least 14 days before the due date.
Check the postmark if you are receiving your statements
shortly before payment is due and complain to the card issuer.

Your payments should be credited the day they are received.
Check with the company to see where the problem is. One way
that you can avoid this is by paying your credit card bill through
your checking account electronically.

What To Do if You Find a Mistake?

Send a letter to the creditor within 60 days of finding the
mistake. Give your name, account number, problem and
the amount involved.

Pay the part of the bill that is not an error. You will not have
to pay finance charges on the amount in error unless it is
found that the bill was truly yours.

If you are responsible for the amount you must pay the
finance charges that accrued during the time the complaint
was being investigated.

A creditor must respond to your letter within 30 days or
correct the bill. Your bill must be corrected within two billing
periods or 90 days or you should receive a statement saying
why the bill is correct.

If the bill is still disputed after the negotiation period is over,
the creditor may report you to the credit bureau. Check your
credit file. You have the right to add your statement to your
file, which will be included in response to all future inquiries.

Most credit card companies have toll-free numbers, others
accept collect calls. Always note the name of the person you
talk to. Follow up your call with a letter to document your
case to preserve your billing rights.

I would also send a certified letter with a return receipt
requested. This shows that you have fulfilled your side of the
card agreement.

Keep copies or records of all letters, documents and calls.

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