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How Credit Cards Work

By: Melanie Radzicki McManus  | 

The Stripe on a Credit Card

Your card has a magstripe on the back and a place for your all-important signature.
Your card has a magstripe on the back and a place for your all-important signature.
Illustration by Rosaleah Rautert

The stripe on the back of a credit card is a three-track magnetic stripe, often called a magstripe. The magstripe, which is very similar to cassette tape, contains encoded information about your account via tiny iron-based magnetic particles enclosed in a plastic-like film. Each particle is really a small bar magnet about 20-millionths of an inch long. Information can be "written" on a magstripe because the bar magnets can be magnetized in either a north or south pole direction.

If a magstripe reader — such as those within an ATM or at a checkout — isn't accepting your card, your problem is probably either a dirty or scratched magstripe, or one that has been erased. The most common causes for erased magstripes are exposure to magnets, like the small ones used to hold notes and pictures on a refrigerator, or exposure to a store's electronic article surveillance(EAS) tag demagnetizer.

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Once you successfully swipe your card, your potential purchase is authenticated to help ensure it's really you who is using your card, not someone else. There are several types of authentication being used. Gas pumps often require inputting your ZIP code, for example, while online purchases may require a password or a code sent to your cellphone. Sometimes your card may be declined when traveling, as authentication may be based on location. So if you live in Chicago and charge most items in that region, but a charge suddenly pops up from a store in Alabama, that charge may fail to be authenticated.

One of the biggest downfalls to magstripe cards is that skimming devices on readers can capture your information, which thieves can then use to create fake new cards. But don't fret. Magstripes are being phased out of credit cards in favor of the more secure chip-based credit and contactless cards, with Mastercard leading the way. Starting in 2024, most new Mastercard credit and debit cards won't be required to have a stripe, with a complete phase-out by 2033.

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