Magnetic stripe

What Is Magnetic Stripe?

A magnetic stripe is a thin, dark band typically found on the back of plastic cards, such as credit cards and debit cards. This stripe contains microscopic iron-based particles whose magnetic properties can be altered to encode and store data⁴⁵, ⁴⁶. When a card with a magnetic stripe is swiped through a card reader, the reader interprets these magnetic changes, converting them into digital information that can be used for various purposes, primarily within payment systems and access control. This technology fundamentally revolutionized how personal and financial information could be stored and retrieved for transactions.

History and Origin

The concept of magnetic recording on tape for data storage existed before its application to cards. In the early 1960s, IBM engineer Forrest Parry sought a reliable method to attach magnetized tape to a plastic card to create secure identification for CIA officials⁴³, ⁴⁴. After encountering issues with adhesives, his wife suggested using a clothes iron to melt the tape onto the card, which proved successful⁴².

IBM quickly recognized the potential of this invention, and in 1969, the company spearheaded the establishment of standards for magnetic stripe technology, led by project manager Jerome Svigals⁴⁰, ⁴¹. The magnetic stripe approach developed by IBM was adopted as a U.S. standard in 1969 and an international standard two years later³⁹. By the 1970s, credit card companies began integrating this technology to store payment and account information, fundamentally transforming how consumers engaged in commerce³⁸. This innovation allowed for faster and more secure transaction processing compared to the manual methods used previously³⁷.

Key Takeaways

• A magnetic stripe stores data on a strip of magnetic material embedded in a card.
• Data is read by swiping the card through a compatible reader, which translates magnetic impulses into digital information.
• Magnetic stripe technology is prevalent in credit and debit cards, gift cards, and identification badges.
• Despite its widespread use, magnetic stripes are vulnerable to skimming and cloning due due to their static data³⁵, ³⁶.
• Newer technologies, such as EMV chip cards, offer enhanced security measures compared to magnetic stripes³³, ³⁴.

Interpreting the Magnetic Stripe

The data encoded on a magnetic stripe is static, meaning it does not change with each use³². Typically, a magnetic stripe contains three tracks, each capable of storing specific types of information. For financial cards, tracks one and two are predominantly used. Track one often holds cardholder information such as the account number, name, and expiration date. Track two usually contains the primary account number, service code, and discretion data. The third track may hold additional information like currency or country codes, or other data depending on the card's purpose.

When a card is swiped at a point-of-sale (POS) systems terminal, the reader captures this encoded data. The system then processes this information, often sending it to a financial institutions for authentication and approval of the transaction. The reliability of the magnetic stripe depends on its physical condition; damage from scratches, dirt, or demagnetization can render the card unreadable³¹.

Hypothetical Example

Consider a consumer, Sarah, using her magnetic stripe debit card to pay for groceries. When Sarah swipes her card at the checkout terminal, the magnetic stripe interacts with the terminal's read head. This interaction generates a series of electrical pulses that the terminal converts into binary data, which includes Sarah's debit card number, expiration date, and other cardholder information.

This data is then sent to the acquiring bank and subsequently to Sarah's issuing bank for verification. The bank checks if the account is valid, if there are sufficient funds, and if the transaction aligns with typical spending patterns. Upon successful verification, the transaction is approved, and the grocery store's account is credited while Sarah's bank account is debited. If the magnetic stripe were damaged, the terminal might display an error message, prompting Sarah to try another payment method.

Practical Applications

Magnetic stripes have been widely integrated across various sectors due to their simplicity and cost-effectiveness. In payment processing, they are the foundation for most traditional credit and debit cards, enabling in-person transactions globally for decades²⁹, ³⁰. Beyond financial uses, magnetic stripes are common in:

• Identification Cards: Employee badges, student IDs, and loyalty cards often use magnetic stripes to store basic information and grant access to buildings or systems²⁷, ²⁸.
• Gift Cards and Stored Value Cards: These cards frequently utilize magnetic stripes to track monetary balances or redeemable points.
• Hotel Key Cards: Many hotel room keys employ magnetic stripes to grant temporary, secure access to guest rooms.
• Transit Passes: Some public transportation systems use magnetic stripe cards for ticketing and fare collection.

Despite the rise of newer technologies, many payment cards still feature a magnetic stripe alongside an EMV chip to ensure backward compatibility with older card readers that may not be chip-enabled. Organizations that handle payment card data, regardless of the technology used, are subject to the Payment Card Industry Data Security Standard (PCI DSS), a set of security requirements designed to protect cardholder information²⁵, ²⁶.

Limitations and Criticisms

Despite their ubiquity, magnetic stripes have significant limitations, particularly concerning fraud and data security. The primary criticism is that the data stored on a magnetic stripe is static and unencrypted, making it vulnerable to various illicit activities²⁴.

• Skimming: Criminals can use devices called "skimmers" attached to legitimate card readers (e.g., at gas pumps or ATMs) to illegally copy the magnetic stripe data when a card is swiped²², ²³. This stolen information can then be used to create counterfeit cards, leading to fraudulent transactions and financial losses²¹.
• Cloning: The static nature of magnetic stripe data makes it relatively easy to duplicate. Simple and inexpensive equipment can be used to copy the data from one magnetic stripe to another, enabling the creation of fake cards¹⁹, ²⁰.
• Data Breaches: If payment systems using magnetic stripe data are compromised, the unencrypted nature of the information makes it highly susceptible to large-scale data breaches, as seen in past retail incidents¹⁸.
• Physical Vulnerability: Magnetic stripes can be easily damaged by exposure to strong magnets, dirt, moisture, or general wear and tear, rendering the card unusable¹⁷.

These vulnerabilities have driven the global shift towards more secure payment technologies, such as EMV chip cards¹⁶. In the U.S., a liability shift in 2015 incentivized merchants and card issuers to adopt EMV technology, as the party not using EMV became liable for in-store counterfeit fraud losses¹⁵. While this has significantly reduced in-store fraud, magnetic stripe technology still poses a risk management challenge for systems that continue to rely on it¹⁴.

Magnetic Stripe vs. EMV Chip Card

The magnetic stripe and the EMV chip card are two distinct technologies for storing and transmitting payment data, with significant differences in security and functionality.

The primary point of confusion often arises when a card has both a magnetic stripe and an EMV chip. In such cases, the EMV chip is the preferred and more secure method for transactions. If a chip-enabled terminal is available, the card should be "dipped" rather than swiped, as this activates the more robust security features of the chip. However, the magnetic stripe remains present on many cards to ensure compatibility with older terminals or specific transaction types that may not support chip technology.

FAQs

What information is typically stored on a magnetic stripe?

A magnetic stripe usually stores information such as the cardholder's name, primary account number, expiration date, and a service code. For financial cards, this data is typically on tracks one and two of the stripe.

How do magnetic stripes work with card readers?

When a magnetic stripe card is swiped through a reader, the magnetic material on the stripe passes over a read head, which detects changes in the magnetic field⁵. These changes are then converted into electrical pulses, which the card reader interprets as digital data, allowing the system to process the information.

Are magnetic stripe cards still commonly used?

While newer technologies like EMV chips and digital wallets are increasingly prevalent, magnetic stripes are still widely used, particularly in the United States, and often coexist on cards that also feature an EMV chip⁴. Their continued presence ensures compatibility with older card readers and systems globally. Mastercard, for instance, has announced plans to phase out magnetic stripes on new credit and debit cards by 2024 in most markets, with a complete removal by 2033³.

What are the main security concerns with magnetic stripes?

The main security concerns with magnetic stripes include the ease with which their static data can be copied or "skimmed" by fraudsters¹, ². Unlike EMV chips that generate a unique, encrypted code for each transaction, the magnetic stripe data remains constant, making it vulnerable to counterfeiting and unauthorized use if stolen.