Credit Cards: Magnetic Strips

Kristina Hancock and Catie Newsom Stewart

What Is A Credit Card?

Actual dictionary definition: A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale.

  • Generally short term expenses
  • Always need to pay back
  • Can be "maxed out" or used to it's fullest extent
  • Have high interest rates (around 19%)
  • 181 million credit card holders in the United States (approx. 77% of adults)

Key Terms In Understanding Magnetic Strips


"A magnetic stripe card is a card (e.g., a credit card) that contains a stripe of magnetically-encoded data. These cards are paired with readers and writers, and are used in a wide variety of applications for storing information." - BookRags

Ferromagnetic Materials: substances that retain
magnetism after an external magnetizing field is removed
Magnetic Poles: occur in pairs within a magnetized material
Polarized: division of opposite parts (North and South are separated)
the process of converting information into a digital form
Magnetic Domain:
a section within a magnetized object that has uniform magnetism ("magnetic moments" are aligned and point in the same direction)
Magnetic Flux Lines
: "A measure of the quantity of magnetism, being the total number of magnetic lines of force passing through a specified area in a magnetic field"
Magnetic Interference: The disruption of transmission or reception of a signal caused by electrical and magnetic fields
Solenoid: A cylindrical coil of wire acting as a magnet when carrying electric current (produces a magnetic field)

How does it work?

  • Magnetic strips are composed of tiny ferromagnetic particles about 20 millionths of an inch long. Each of these contributes to the magnetism of the bar. These particles are held together by resin and are aligned with their North-South axis parallel to the magnetic strip. These particles are stable and polarized.
  • A credit card magnetic bar that is not encoded is many North-South magnetic domains. North-South fluxes emerge and the bar acts as a magnet.
  • When a credit card is encoded, interference is created somewhere on the strip. Reading the strip consists of detecting these interferences. This occurs when a solenoid flips the poles and reveres the direction of current and forces of attraction and repulsion. A flux line reversal occurs.
  • A magnetic strip reader can understand the information on this strip based on these properties within the strip.


How Have Credit Cards Evolved?

Smart Cards

Europe has placed a ban on magnetic strip cards in exchange for smart cards. Chip and PIN cards are processed using different terminals than magnetic strips. They are embedded with computer chips the sends information into the card reader. It is much more secure in preventing fraud than the magnetic strip because the cardholder must punch in a PIN number in order for the transaction to work. As fraud is becoming more and more of an issue, "smart cards" are more secure than magnetic strips; magnetic strips are contact cards, which relay information simply by swiping the card through the card reader.

Early Magnetic Strips

  • During WW2, magnetic recording on steel tape and wires were used for audio.
  • In the 1950s magnetic strips began to be used for magnetic recordings of computer on a plastic tape coated with iron oxide.
  • In the 1960s IBM used this idea to place these magnetic recordings on a strip to encode information on plastic cards