Have you ever wondered what all the numbers on your credit cards mean? I was processing cards in the pharmacy and noticed that the software knows that the number entered is sometimes incorrect before you even enter the date or security code.
This made me curious, how do they know, since there must be a billion or more cards out there? The 15 or 16 numbers contain information on the card issuer, your account information and a check digit. The first digit is the industry identifier, 1. Airline 2. some Mastercard accounts 3. American Express 4. Visa 5. Mastercard 6. Discover 7. Petroleum 8. Telecommunications 9. Government. The next six numbers are the issuer identification numbers (IIN) (also called the bank Identification number (BIN)), the financial institution that issued the card. The remaining digits, except for the last digit, is your specific credit card account number, selected by the issuer. The last number is the check digit which helps to ensure that the credit card number is valid.
To determine the validity you need a calculation called the Luhn algorithm (also known as modulus 10). It was invented by IBM scientist Hans Peter Luhn.
Look at the credit card number from right to left. skip the first digit (the checksum) then double the 2nd number and every other number (if you get a two digit answer, add the two together and use the sum as your answer – double of 7 = 14 so your answer is 5). Now add the numbers you doubled and all the other numbers. Take the units digit and subtract it from 10, this is your checksum digit (say your total is 52, then 10-2 = 8 which is your checksum). If you can take your previous sum and add the check digit to it, your number must be divisible by 10 to be a valid credit card number 52 + 8 = 60 – Valid ).
The checksum is for basic quality control but will not prevent fraud since the bad guys can generate cards that meet this requirement but will help catch data entry errors. Cards have security codes also known as the card verification value or CVV.
This number is harder for the thieves to obtain as they must be in procession of your physical card. Anyone processing cards that ask for the CVV is preventing someone from using stolen credit card numbers.