The front of your credit card has a lot of numbers -- here's an example of what they might mean.
Here are what some of the numbers stand for:

The first digit in your credit-card number signifies the system:
3 - travel/entertainment cards (such as American Express and Diners Club)
4 - Visa
5 - MasterCard
6 - Discover Card

The structure of the card number varies by system. For example, American Express card numbers start with 37; Carte Blanche and Diners Club with 38.
American Express - Digits three and four are type and currency, digits five through 11 are the account number, digits 12 through 14 are the card number within the account and digit 15 is a check digit.

Visa - Digits two through six are the bank number, digits seven through 12 or seven through 15 are the account number and digit 13 or 16 is a check digit.

MasterCard - Digits two and three, two through four, two through five or two through six are the bank number (depending on whether digit two is a 1, 2, 3 or other). The digits after the bank number up through digit 15 are the account number, and digit 16 is a check digit.

In the next section, we'll look at the stripe on the back of a credit card.

Your card has a magstripe on the back and a place for your all-important signature.
The magstripe can be "written" because the tiny bar magnets can be magnetized in either a north or south pole direction. The magstripe on the back of the card is very similar to a piece of cassette tape (see How Cassette Tapes Work for details).

A magstripe reader (you may have seen one hooked to someone's PC at a bazaar or fair) can understand the information on the three-track stripe. If the ATM isn't accepting your card, your problem is probably either:
A dirty or scratched magstripe

An erased magstripe (The most common causes for erased magstripes are exposure to magnets, like the small ones used to hold notes and pictures on the refrigerator, and exposure to a store's electronic article surveillance (EAS) tag demagnetizer.)
There are three tracks on the magstripe. Each track is about one-tenth of an inch wide. The ISO/IEC standard 7811, which is used by banks, specifies:

Track one is 210 bits per inch (bpi), and holds 79 6-bit plus parity bit read-only characters.
Track two is 75 bpi, and holds 40 4-bit plus parity bit characters.
Track three is 210 bpi, and holds 107 4-bit plus parity bit characters.
Your credit card typically uses only tracks one and two. Track three is a read/write track (which includes an encrypted PIN, country code, currency units and amount authorized), but its usage is not standardized among banks.
The information on track one is contained in two formats: A, which is reserved for proprietary use of the card issuer, and B, which includes the following:
Start sentinel - one character
Format code="B" - one character (alpha only)
Primary account number - up to 19 characters
Separator - one character
Country code - three characters
Name - two to 26 characters
Separator - one character
Expiration date or separator - four characters or one character
Discretionary data - enough characters to fill out maximum record length (79 characters total)
End sentinel - one character
Longitudinal redundancy check (LRC) - one character
LRC is a form of computed check character.
The format for track two, developed by the banking industry, is as follows:
Start sentinel - one character
Primary account number - up to 19 characters
Separator - one character
Country code - three characters
Expiration date or separator - four characters or one character
Discretionary data - enough characters to fill out maximum record length (40 characters total)
LRC - one character

For mo re information on track format, see ISO Magnetic Stripe Card Standards.
There are three basic methods for determining whether your credit card will pay for what you're charging:
Merchants with few transactions each month do voice authentication using a touch-tone phone.
Electronic data capture (EDC) magstripe-card swipe terminals are becoming more common -- so is swiping your own card at the checkout.
Virtual terminals on the Internet

This is how it works: After you or the cashier swipes your credit card through a reader, the EDC software at the point-of-sale (POS) terminal dials a stored telephone number (using a modem) to call an acquirer. An acquirer is an organization that collects credit-authentication requests from merchants and provides the merchants with a payment guarantee.

When the acquirer company gets the credit-card authentication request, it checks the

transaction for validity and the record on the magstripe for:

Merchant ID
Valid card number
Expiration date
Credit-card limit
Card usage

Single dial-up transactions are processed at 1,200 to 2,400 bits per second (bps), while direct Internet attachment uses much higher speeds via this protocol. In this system, the cardholder enters a personal identification number (PIN) using a keypad.

The PIN is not on the card -- it is encrypted (hidden in code) in a database. (For example, before you get cash from an ATM, the ATM encrypts the PIN and sends it to the database to see if there is a match.) The PIN can be either in the bank's computers in an encrypted form (as a cipher) or encrypted on the card itself.

The transformation used in this type of cryptography is called one-way. This means that it's easy to compute a cipher given the bank's key and the customer's PIN, but not computationally feasible to obtain the plain-text PIN from the cipher, even if the key is known.

This feature was designed to protect the cardholder from being impersonated by someone who has access to the bank's computer files.

Likewise, the communications between the ATM and the bank's central computer are encrypted to prevent would-be thieves from tapping into the phone lines, recording the signals sent to the ATM to authorize the dispensing of cash and then feeding the same signals to the ATM to trick it into unauthorized dispensing of cash.

If this isn't enough protection to ease your mind, there are now cards that utilize even more security measures than your conventional credit card: Smart Cards.

The "smart" credit card is an innovative application that involves all aspects of cryptography (secret codes), not just the authentication we described in the last section. A smart card has a microprocessor built into the card itself. Cryptography is essential to the functioning of these

cards in several ways:

The user must corroborate his identity to the card each time a transaction is made, in much the same way that a PIN is used with an ATM.

The card and the card reader execute a sequence of encrypted sign/countersign-like exchanges to verify that each is dealing with a legitimate counterpart.

Once this has been established, the transaction itself is carried out in encrypted form to prevent anyone, including the cardholder or the merchant whose card reader is involved, from "eavesdropping" on the exchange and later impersonating either party to defraud the system. This elaborate protocol is conducted in such a way that it is invisible to the user, except for the necessity of entering a PIN to begin the transaction.

Smart cards first saw general use in France in 1984. They are now hot commodities that are expected to replace the simple plastic cards most of us use now. Visa and MasterCard are leading the way in the United States with their smart card technologies.

The chips in these cards are capable of many kinds of transactions. For example, you could make purchases from your credit account, debit account or from a stored account value that's reloadable. The enhanced memory and processing capacity of the smart card is many times that of traditional magnetic-stripe cards and can accommodate several different applications on a single card. It can also hold identification information, keep track of your participation in an affinity (loyalty) program or provide access to your office.

This means no more shuffling through cards in your wallet to find the right one -- the smart card will be the only one you need!

Experts say that internationally accepted smart cards will be increasingly available over the next several years. Many parts of the world already use them, but their reach is limited. The smart card will eventually be available to anyone who wants one, but for now, it's available mostly to those participating in special programs.

Although the numbers are increasing, consumers are still not using their credit cards on the Internet nearly as much as e-tailers (electronic retailers) would like. That's why many cyber-merchants continue to offer a toll-free order number so that shoppers have the choice of calling their order in. Cyber-shopping may be convenient -- and some people do all of their shopping online -- but credit-card fraud is always a threat, both on the Internet and out in the real world. Hackers have found ways to steal credit-card numbers from Web sites.

To illustrate the importance of tight security, a network TV reporter, tipped off about loose security on an Internet Web-hosting site, was able to gain access to about 1,500 customer records, which included everything from credit-card numbers and payment records to comments about particular customers.

These are the kinds of stories that deflate consumer confidence. Some e-tailers blame consumer reluctance on the inability in cyberspace to make the kind of personal contact that a shopper gets when he looks into the eyes of a store merchant. Experts say that this kind of comfort level will be boosted when online payment methods and security measures are standardized -- much as they are in the retail and mail-order industries.

While Internet companies have taken responsibility for security breaches and resulting losses to credit-card users, there remains the growing problem of identity thieves who use stolen credit cards to make purchases on the Internet. And while unfair or fraudulent practices by credit-card companies are not commonplace, they do happen. The good news is that consumers are protected by law -- in case of credit-card fraud online or off, you are only liable for a maximum of $50 of the amount stolen.

And fortunately, the Federal Trade Commission (FTC) and the media are watching closely. In 1994, the FTC ordered TransUnion credit-reporting bureau to stop selling "sensitive" consumer data -- data on 160 million Americans -- to junk-mail producers. The FTC charged that TransUnion violated the Fair Credit Reporting Act by selling consumer information to target marketers who lack any of the allowable purposes listed under the act. TransUnion denies that it sold information that could affect customers' appealed the FTC's ruling, but lost.

If the mailing-list issue bothers you -- and it bothers most of us -- pay attention when you're completing that credit-card application. Some application forms now provide a box that you can check to allow or disallow the selling of your information to mailing lists. You can also protect yourself by taking your name off the credit bureaus' mailing lists.

One way to do this is to visit The Consumer Credit Reporting Industry Opt-Out Prescreen Web site. On this site you can fill out a form and opt-out of recieving pre-approved credit or insurance offers in the mail. You can also call 888-5-OPT-OUT (888-567-8688). Alternatively, you can write to the major credit card bureaus and request that your named be removed from their mailing lists.

When you write to these companies, include your complete name, name variations and mailing address, Social Security number and signature and state clearly that you want your name removed from their mailing lists. You can write any of these major reporting bure aus and they will contact the other major bureaus with your request:

Experian Consumer Opt Out, 701 Experian Parkway, Allen, Texas, 75013
Equifax Inc. Options, P.O. Box 740123, Atlanta, Georgia, 30374-0123
Trans Union Marketing List Opt Out, P.O. Box 97328, Jackson, MS 39288-7328
The Direct Marketing Association (DMA) tracks consumers who prefer not to receive solicitations by mail or phone. Check their Consumer Assistance site for more information. There are a lot of simple steps you can take to protect yourself and your credit card -- starting with making sure you sign it as soon as it arrives in the mail.

These tips are important and universal:

Sign your card -- as soon as you receive it! (Obviously, this is only as effective as the clerk who's checking it.)

When you use your card at an ATM, enter your PIN in such a way that no one can easily memorize your keystrokes.

Don't leave your receipt behind at the ATM.

Your PIN and account number from a discarded receipt could make you vulnerable to credit-card fraud. Also, don't throw out your credit-card statement, receipts or carbons without first shredding them!
Never give your credit-card number over the telephone unless you initiated the call.Even when you place the call to a legitimate merchant (such as a mail-order company), never give your card number out over a cordless phone. Radio scanners that eavesdrop on these conversations are available for a few hundred dollars at any electronics store, and your voice can be received by one from a far greater distance than the maximum useful range of your cordless phone. One common scam is when someone calls you "back" right after you place an order, claims to be from the merchant and tells you that there was a problem with your card number -- would you mind giving it to them again? The best thing to do is ask for a contact name and call the merchant back at the number you used originally.

Ignore any credit-card offer that requires you to spend money up-front or fails to disclose the identity of the card issuer.

Make certain you get your card back after you make a purchase (one habit to observe is to leave your wallet open in your hand until you have the card back). Also, make sure that you personally rip up any voided or cancelled sales slips.
Always keep a list of your credit cards, credit-card numbers and toll-free numbers in case your card is stolen or lost.

Check your monthly statement to make certain all charges are your own, and immediately notify the card issuer of any errors or unauthorized charges. (More on this later!)
Now, you get a credit-card application and there's all this small print. Want to know what it's really saying?

Before we get into shopping for a card, let's go over some important terms you'll encounter in credit-card brochures or discussions with potential lenders:

Annual fee - A flat, yearly charge similar to a membership fee
Many companies offer "no annual fee" cards today, and lenders who do charge annual fees are often willing to waive them to keep your business.

Finance charge - The dollar amount you pay to use credit

Besides interest costs, this may include other charges such as cash-advance fees, which are charged against your card when you borrow cash from the lender. (You generally pay higher interest on cash advances than on purchases -- check your latest bill to find out what you're paying for this service!)

Grace period - A time period, usually about 25 days, during which you can pay your credit-card bill without paying a finance charge
Under almost all credit-card plans, the grace period only applies if you pay your balance in full each month. It does not apply if you carry a balance forward. Also, the grace period does not apply to cash advances.

Annual percentage rate (APR) - The yearly percentage rate of the finance charge

Interest rates on credit-card plans change over time. Some of these adjustments are tied to changes in other interest rates, such as the prime rate or the Treasury Bill rate, and are called variable-rate plans. Others are not explicitly tied to changes in other interest rates and are called fixed-rate plans.

Fixed rate - A fixed annual percentage rate of the finance charge
Variable rate - Prime rate (which varies) plus an added percentage (For example, your rate may be PR + 3.9 percent.)

Introductory rate - A temporary, lower APR that usually lasts for about six months before converting to the normal fixed or variable rate (This is a hot topic -- more about it later.)
Experts say that if you're smart, you'll do the same kind of comparison shopping for a credit card that you do when you're looking for a mortgage or a car loan. This is a good idea because the choices you make can save you money. The process is not a simple one -- here are some tips that should help you get started:

Do some research - There are plenty of places, both online and offline, where you can read about credit-card offerings and even get credit-card ratings, but since rates and plans change so often, it's a good idea to call the institutions you're interested in to confirm the information and to see if there are other plans that might work for you.

A reliable and non-commercial resource is the Federal Reserve Board. Also, the non-profit consumer credit organization U.S. Citizens for Fair Credit Card Terms offers credit-card ratings from its research (and so do a lot of commercial organizations -- many of whom are also credit-card issuers).

Make a list - Make a list of credit-card features that fit your financial needs and rank the features according to how you plan to use the card and pay your monthly bill.
Review the plans - Review all of the information you've gathered on different plans. Pay special attention to the APR - - you want a low rate, but not necessarily the lowest. This is because, depending on your lifestyle and payment habits, you might benefit more from a card that offers cash rebates, discounts or frequent-flier miles.

Check out credit unions - Look into the possibility of joining a credit union. Credit unions are non-profit, and they have lower overhead so they can charge lower interest rates. Credit unions are newer to the credit industry so they are eager to generate credit-card loans. However, you'll probably be required to open a share account or savings account to join.
Credit unions typically are limited to a particular employer and its employees, but that's changing. Due to industry consolidations, credit unions are rapidly expanding their fields of membership. To find out which credit union you may be eligible to join, contact the Credit Union National Association (CUNA).

Compare plans - If you already have a credit card, be sure that you're making a good move before you swap cards. If you are a current cardholder and have a good credit rating, see if the institution that issued your card will lower your current rate. Don't be afraid to negotiate!