How Do Credit Cards Get Read?

The Magstripe

• Credit Card Magstripe Being Read
  
  Every credit card has a dark stripe on its back that allows it to be read. This stripe is magnetized and stores information like the cardholder's name, card number, expiration date, credit limit and usage. Data is stored on the stripe in tiny magnets that can be magnetized to face either a north or south direction. This data is kept in one or more tracks on the magstripe and read when the card is swiped.
  
  

Swiping the Card

• Magstripe-card swipe terminals are now very common. When a card is swiped through a reader, the data is read and captured. The terminal, or reader, then dials what is called an acquirer. The acquirer is an organization--usually a financial institution--that provides merchants (stores) with a payment guarantee. The acquirer will eventually send all transactions to the card issuer in a batch for funding.
  
  

PIN

• PINs, or personal identifcation numbers, are not located on the credit card but are an added feature to protect cardholders. When you enter a PIN into a cardreader, it is encrypted and sent to a database for authentication. If the PIN entered is incorrect, the transaction will be canceled.