Credit Card Parts – The Components of Credit Cards and their Functions
Credit card is like a beautiful and interesting puzzle, with each component part playing an important role to make it whole. On the surface of it, credit card looks like a plastic card with few numbers, some text, a shining square box and a black strip. But if you look closely, credit card is a closely knit precision tool which will enable you to buy things instantly with a promise to pay for them later.
So let us examine the standard credit card parts and what is the function of each component part.
First and foremost, most of the credit cards are made of plastic or more precisely, polyvinyl chloride acetate (PVCA). The composition of copolymers of vinyl acetate and vinyl chloride makes the material dense and water resistent and is a perfect fit for payment cards. These qualities of the material protect the cards from normal wear and tear.
There are few exceptions as far as usage of PVC in credit cards is concerned. For example, the American Express Centurion Card is made of anodized titanium, the J.P. Morgan Palladium Card is made of precious metals like gold and palladium, Barclays Visa Black Card is made of carbon and Biodegradable Discover Card is made of PVC which is biodegradable.
The size of the credit cards should conform to ISO/IEC 7810 ID-1 standard and as such most of the credit cards are sized 85.60 × 53.98 mm.
Now let us look into the subtle components or elements of a credit card.
Parts of a Credit Card:
1. Credit Card Number:
How does a credit card number work?
ANSI Standard X4.13-1983 is used in issuing credit card numbers by most of the national credit-card systems. Each number in the credit card has a story to tell. For example sake, let us take a dummy yet realistic credit card number-4012888888881881.
The first digit in the number represents the Major Industry Identifier. The category to which the credit card belongs is identified with the help of this first digit.
In our example, 4 represents Banking and Financial.
Major Industry Identifiers:
1 & 2 represent Airlines
3 represents Travel & Entertainment
4 & 5 represent Banking & Financial
6 represents Merchandising & Banking
7 represents Petroleum
8 represents Telecommunications
9 represents National assignment
The first 6 digits (Issuer Identification Number) identifies the institution which issued the card. The IIN was previously called Bank Identification Number (BIN) is issued under ISO/IEC 7812 standard.
Issure Identification Numbers:
Diners Club: 38xxxx
Carte Blanche: 38xxxx
You can look up for credit cards with the help of IIN. For example, ‘371241 is an American Express Premier Rewards Gold Card / Platinum Card. ‘419607’ is a Visa Standard Chartered Bank (India). ‘520169’ is a BestBuy MasterCard by Bank of Communications/HSBC (China).
Person’s Account Number:
The 7th digit and subsequent digits except the last digit represent the account number of the credit card holder. In our example ‘888888188’. In most of the cards it is 9 digits and this offers a trillion possible combinations.
Check Digit or Checksum-Luhn Algorithm:
The Luhn Algorithm is used to validate the credit card number and final digit in credit card, which is also called check digit or checksum, is used for validation. Luhn algorithm is a simple checksum formula which is used for validating various identification numbers which includes credit card numbers. It is also called Luhn formula or modulus 10.
How to check whether a credit card number is valid?
Let us take the dummy credit number that we had used as an example – 4012888888881881
Now let us double every alternate digit from the right.
Digits to double- 4 1 8 8 8 8 1 8 – 8 2 16 16 16 16 2 8- Doubled Digits
The Un-doubled Digits-0 2 8 8 8 8 8 1
Now new digits are added to the un-doubled digits (Note:The double digits are added as a sum. so 16 become 1+6)
So we have 8+0+2+2 7+8+7+8 7+8+7+8 2+8+8+1 =91
The number is valid if the final sum is divisible by 10. But 91 is not divisible by 10. Unfortunately, our assumed number is invalid or fake.
2.Issuing Bank Logo
This is the logo of the bank which issued the credit card. This issuing bank provides branded payment cards directly to customers via card association. The process of credit card payments of a particular brand is done by card associations which are nothing but a network of acquiring banks and issuing banks. Most of the banks issue credit cards. The most popular among them are Bank of America, Capital One, Chase, Citibank, Standard Chartered, HSBC, Barclay.
Some of the famous branded card associations are – Visa, MasterCard, Discover, JCB, American Express, Diner’s Club. “WellsFargo-Visa” and “Citi-MasterCard” are co-brands.
The primary liability for card holders debt is that of the issuing bank but non-payments liability is shared by acquiring bank and the issuing bank. These rules are laid down by the Card Association brand.
The expiration date on the credit cards tell the credit card holder and the one who accepts credit cards, that the card is valid till that day and cannot be used as a payment vehicle beyond that date.
Importance of expiry dates on credit cards:
Expiration dates on credit cards are important for 4 reasons:
a. Prevention of fraud:
Whether the card is open or not is validated through the expiry date by merchants and issuers at point of sale (POS) and real-time authorizations. It is difficult to create a conterfiet card with a valid expiration date.
b. Revaluation of creditworthiness:
A short expiration date, say of 3 or 4 years helps the credit card companies to revalue the credit card holders credit worthiness on an on-going basis. This also helps them to revise terms, credit line and other conditions to the better or worse. But they cannot arbitrarily raise the interest rate or charge an annual fee as credit card holders are protected by Credit CARD Act.
c. Wear and Tear:
Even though the plastic cards are dense and water resistent, they cannot last forever. Even the magnetic stripe wears out after a few years. So this expiry date on the credit card ensures that the credit cards are replaced in time before they get to old to be funtioning properly.
d. Innovation and Design:
A credit card might offer great perks and privileges but aesthetics matter too. Look and feel can influence decisions and payment card companies are well aware of this fact. Expiration dates help the issuing companies to introduce new designs and ensure that their their newest products are circulating in the market.
4. Cardholder Name
The name on the credit card identifies you as the owner if the card was issued to you. This also means that you agree with the terms and conditions. If you are the owner of the card, then you alone can use it.
Hologram is a security sticker or embeded tag which intends to show that the bank or credit card is ‘original’ of issuing brand and not a cheap imitation. If you have a visa credit card, then you will find a hologram with a dove in flight. Hologram is replicated from master hologram and is difficult to forge. Creating a similar hologram would involve huge investment and specialized technology. The credit card security holograms are patented to Herman Lopata, the President of the New York based Automatic Toll Systems, Inc. Holograms can be either 2D/3D images, or dot matrix or electron beam lithography.
6.Card Brand Logo
Card brand logo is the logo of the branded card associations like Visa, MasterCard, Diners Club, Discover.The logo is meant for branding.
1. Magnetic Stripe:
On the back of the credit or bank card, you will find a black stripe. This stripe which is also called Magstripe, is made of minute magnetic iron particles. These particles are miniature bar magnets of size 20 millionth of an inch. They are embeded on a thin film similar to now obsolete cassette tapes. By altering the magnetism of these miniature bar magnets on a thin film, data can be stored on it. This magnetic stripe stores digital data like account number, cardholder’s name etc.
Need for faster payments and growing computerization led to the invention of magstripes in 1960 by IBM. With a sigle swipe the magnetic stripe reader can encode or decipher information on the 3 track stripe.
Word of caution: The magnetic stripes are fragile and can get scratched easily. And also, strong magnetic fields can erase the information from the stripe.
2. Signature Strip
Importance of card owner’s signature at the back of the credit card:
There is a small slot below the magstripe for signature of the credit card owner. To put it bluntly, an unsigned credit card is invalid. I have noticed while waiting in a queue at stores and groceries many customers submitting unsigned credit cards and getting away with it. As per the agreement between the credit card issuer and the merchant, whenever a customer produces a credit card to be swiped at Point of Sale (POS), the merchant has to verify the signature at the back of the card with the signature and bill and they should match. But the importance of signature is conveniently ignored by both the merchant and the credit card holder.
You will realize the importance of signing behind the credit card only when you lose your unsigned payment card. Unsigned credit cards can be used by anyone, before you realize you lost your card and cancel it. But if you have signed your credit card and you have lost it and someone swipes your card, then you can always dispute the charges by demading the merchant to see the signed copy of the bill. It is the responsibility of the merchant to verify and match the signatures.
3. CVV Number:
CVV number or card verification value is the 3 digit number which can be found on backside of the card, next to the signature slot, in most of the branded credit cards. On American Express card this numeric code consists of 4 digits.
Importance of Card Verification Value(CVV)
CVV is usually asked by merchants while making online purchases. This code proves that you posses the physical card while making the purchase and payment online. In a way, CCV takes the place of your signature as you won’t be able to sign your online bill physically. This helps to reduce fraud. CVV code is also called “Card Security Code” or CSV.
4. Service Disclaimer
Service disclaimer is a disclaimer which emphasizes that the card is a property of the issuing bank and only authorized personnel can use it in accordance with the terms and conditions of use.
5. Bank Address and Customer Service Number:
This is self-explanatory. This information can come handy anytime. Often we forget that we can find the customer care number right in our wallets while we go about searching in directories and on the internet.
I am a layman and I have tried to understand the parts of the credit card through research and whatever information I could get my hands on and explained it above. It is good to know the components of a credit card and their function which, I must say, makes it a great payment vehicle. Modern technology and research has set the pace for newer and better payment systems but for now credit cards rule.
What additional thing do you think they should add to a credit card which will make it more secure? Let me know in comments!