Decoding the Numbers on Your Credit Card

Sep 2, 2018

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As you look for strategies to increase the number of your credit card rewards points, have you ever wondered about the numbers that form the foundation for all that earning potential? Each of those figures plays a role with each purchase you make. They help merchants know that your card is real, and they help banks process those transactions in a matter of seconds.

So what’s the story behind all those numbers? Are they randomly assigned with a credit-card-number generator?

Let’s start with the first digit. This identifies the issuer.

The next five or six digits are all tied to your bank. “It’s called a bank identification number,” Mark Nelsen, senior vice president, risk products and business intelligence at Visa, told me.

There are obviously lots of banks, so those numbers — commonly known by their acronym of BINs — vary. “For example, Chase owns the rights to hundreds of BINs,” Nelsen said. “If you’re not a big enough of bank, you might license a portion of the range. It depends on the size of your bank where you start in the numbering scheme.”

My two Chase cards both begin with the same seven digits. So, I asked Nelsen, why bother dividing the digits into sets of four? Simplicity. “When people started using credit cards, it was just easier to group by four,” Nelsen said. “It’s easier to read off four digits at a time to a customer service representative over the telephone.”

The remainder of the digits make up your actual individual account number. However, the final digit is not part of the account. It’s known as a check digit, which is used to verify that your card is real. Nelsen said that credit card processing uses the Luhn algorithm, which is a formula that helps banks and card companies protect against accidental errors. It’s not a security measure. Instead, it simply uses the 16 digits — 15 in the case of cards from American Express — to verify that the card number is valid and has not been incorrectly entered. The check digit plays an important role in this process. Certain combinations of numbers must be divisible by the number 10 to satisfy the algorithm’s test. If you’re interested in seeing the algorithm in action with your own card, use this handy PDF from creditcards.com.

Credit Card Security Code
A three- or four-digit security code adds one extra layer of protection for credit cards.

On top of the actual card number and the expiration date, the security code is an additional security feature. “That was really designed for e-commerce and card-not-present transactions,” Nelsen said. “Twenty years ago, you would make a telephone order, and that code was used to help determine if it was an authentic card or not.”

Today, of course, it’s still there. If you’ve made a recent telephone order, you’ve probably heard the voice on the other end of the phone ask for your CVV. For American Express, it’s a four-digit code on the front. All other cards come with a three-digit code on the back.

While you may be curious about the figures in front of your eyes, there are many hidden numbers and formulas used in credit card transactions, too. “There’s a lot of stuff that you can’t see,” Nelsen said. “Behind the scenes, there is so much happening. Whether you’re using contactless payments or inserting a chip card, there is a whole suite of cryptography happening to tell the merchant that the card is authentic.”

A New Approach to All Those Numbers

Over time, Nelsen predicts that some bigger changes will come to cards to enhance security. “You can get a card today where your three-digit security code is replaced with a digital screen that changes the code every hour or every day,” Nelsen said. “It’s a dynamic approach to security. It’s started with a couple of issuers in France. For now, there is no large-scale deployment in North America.”

While Nelsen highlighted that a constantly-changing security code can certainly create a bigger roadblock for criminals, it also creates a potential hassle for purchasing. “If you’re a frequent shopper, you’ve probably memorized your three-digit code,” Nelsen said. “You may not like the additional friction required to retrieve the card and enter a new number.”

Dynamics Inc. partnered with Emirates NBD to unveil a battery-powered credit card that can instantly replace the 16 digits associated with an account. Image rights belong to Dynamics Inc.
Dynamics Inc. partnered with Emirates NBD to unveil a battery-powered credit card that can instantly replace the 16 digits associated with an account. Image courtesy of Dynamics Inc.

Earlier this year at CES, Dynamics Inc. unveiled a new connected card that can instantly delete the 16 digits of a compromised account and issue a new set of numbers for cardholders. “If a criminal stole your card, the issuer could publish a new number to your card without ever having to send a new physical one,” Nelsen said. 

While the ability to instantly replace the numbers on your credit card sounds like a great benefit for easing concerns about identity theft, widespread adoption of this kind of technology is in the distant future. “The challenge is that as these cards get more complex, they tend to just get more expensive,” Nelsen said. “The price point is really high at this point and so that will take a long time before you’ll see any of that type of technology hit the market on any type of wide scale.”

Featured image courtesy of mixetto/Getty Images.

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