Simpler Smarter Savings

The magnetic stripe technology featured on the back of credit cards today is very similar to technology found in cassette tapes that were used in the past to record music and voices. Information is recorded on a magnetic stripe through small bar magnets encased on it. It was possible to hear voices on cassette tapes because of motors that moved the magnetic cassette tape through readers. When a credit card is used, the customer provides that same information gathering motion by swiping the card.

How The Magnetic Stripe Works

At the point of sale, this credit card processing method allows payment to merchants immediately for the customer’s purchase. This makes payment convenient for customer’s and for merchant accounts. The customer can then pay at a later time, providing added convenience for them. The magnetic stripe holds information that allows the entire process to happen.

Encoded on the magnetic stripe are the customer’s full name, the credit card number, the code of the country that issued the card and the expiration date of the card. Once the card is swiped, the information is processed and an authorization is obtained, letting the merchants know if the transaction is approved or denied.

Ways To Receive Authentication Of A Credit Card

The three main ways a credit card is authenticated or approved are:

Electronic Capture of Data – Done at the point of sale, when the customer swipes their card at the terminal. The approval process is instantaneous. Retailers prefer this method because of the fast speed of transactions.

Virtual Internet Terminal – This process is also very fast. It requires the customer to enter a secure personal identification number, or PIN number.

Voice Authentication by Phone – merchants who do not have many credit card transactions going through their point of sale terminals each month often use this method of credit card processing. Transaction approval is received by using a touch-tone phone to call a number. Approval is given by a company on the other end, known as an acquirer. They check the customer’s account and issue an approval number. This guarantees payment to merchant accounts.

Magnetic reading technology came about during World War II, allowing people to record audio on magnetic tape. No one could have foreseen the popularity of this technology in the future, because of the increased use of credit cards.