Statistics show that the average person carries three credit cards today.  But do you know how any of your credit cards actually work? Here are the facts:

  • First: How do banks choose your credit card number? It turns out, the first digit designates the type of card you have.  Like, Visa cards start with the number “4,” and MasterCards start with the number “5.” Then, the remaining numbers identify the bank that issued your card, as well as your unique account number.

  • Next: Why is there a separate security code on credit cards? Like some cards have a three digit code printed on the back. Experts say that was added for transactions where merchants can’t physically see or swipe your card – like when you shop online. It’s a way of verifying that you’re using a real credit card, and not just a stolen credit card number.

  • Also: Why do some new cards have a chip embedded in them? That’s the latest way banks are fighting fraud.  Because so-called “smart cards” with chips are harder to counterfeit. That’s why smart cards are already standard in Europe.  And all banks expect to offer “smart” credit cards in North America within two years.

  • Finally, have you ever wondered why the numbers on most credit cards are raised? Experts say that’s a holdover from pre-Internet days, when the only way stores could process credit card transactions was to save an imprint of each card containing your name, account number, and your card’s expiration date. That required running cards through a machine that needed raised numbers to work. But today, stores can just swipe cards electronically, which is why many newer cards are issued with flat numbers.