Credit Card Processing Tip:how To Interpret The Numbers On A Credit Card

When it comes to credit card processing, wouldn't it be convenient if small business

owners could tell if a credit card was fake or invalid just by looking at it? Turns out they can.

Most consumers and even business owners who use credit card processing think that their credit card number is completely random. Just something made up by their card issuing bank. However, your credit card number is actually calculated based on a defined system. Understanding how the credit card number is created assists with credit card processing by allowing you to identify invalid cards.

To explain, I will use the hypothetical credit card number 1234 4321 1234 4321.

The first number in your 16-digit credit card number is the Major Industry Identifier. In credit card processing, this number identifies the industry category of the entity that issued the card. A one or two, such as in our hypothetical card number means the industry category is an airline. Three is travel and/or entertainment. Four and five are banking or financial, which are by far the most common. A six is merchandising and banking while a seven is petroleum. Eight means it was issued by a telecommunications entity. And a nine means the card was issued by a national assignment.

The first six digits viewed all together are the Issue Identification Number, which in credit card processing identifies the institution that issued the card. A Visa card will always begin with a four (4xxxxx), a MasterCard with a five (5xxxxx) and a Discover card with a six (6xxxxx). Therefore, if a card began with a 529962, it could be identified with credit card processing as a Much-Music MasterCard.

Digits seven through fifteen of the credit card numbers on a card identify the card holder's personal account number in credit card processing.

The last digit - number 16 - is called the check digit or checksum. It is used to validate the Luhn algorithm, a common credit card processing tool. What is the Luhn algorithm? The Luhn algorithm is a mathematical formula used in credit card processing that allows you to determine a card's validity just by looking at its 16 digit number. Here's how to determine a card's validly using the Luhn formula: Step 1:Double every other digit on the card's number starting with the first one. For example with our fake credit card number (1234 4321 1234 4321), the numbers that get doubled are 1, 3,4,2,1,3,4,2. These numbers double to 2,6,8,4,2,6,8, and 4.

Step 2:Take your doubled numbers and add them to the card numbers you never doubled. So, 2,6,8,4,2,6,8, and 4 would be added to the leftover, not doubled numbers from the original card number (These would be every other number staring with the second number). In this case, 2, 4, 3, 1, 2, 4, 3, and 1. Add each pair of numbers individually. Ex: 2+2, 6+4, 8+3, 4+1, 2+2, 6+4, 8+3 and 4+1. You will end up with a string of numbers like this 4, 10, 11, 5, 4, 10, 11, and 5.

Step 3: Add the numbers together with double digits being added as a sum of their digits. Ex: 10 would be added as 1+0 or 1, 11 as 1+1 or 2. 4+1+0+1+1+5+4+1+0+1+1+5 equals 24.

Step 4: Check for validity by dividing by 10. Take the final number from step 3, in our case 24, and divide it by 10. If the card can be divided by 10, then it is valid. If it can't, like our 24, the card is either fake or invalid.

Whether or not you plan on using the Luhn test to determine if a card is valid, it is still useful in credit card processing to understand where the numbers on your credit card come from.

by: Nathan Randel

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