The stripe on the back of a credit card is a magnetic stripe, often called a magstripe. The magstripe is made up of tiny iron-based magnetic particles in a plastic-like film. Each particle is really a very tiny bar magnet about 20 millionths of an inch long.
Your card also 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 fastened to the back of a card.
Instead of motors moving the tape so it can be read, your hands provides the motion as you “swipe” a credit card through a reader or insert it in a reader at the gas station pump.
How magstrip got a shape and approved for use ?
Magnetic recording on steel tape and wire was invented in Denmark around 1900 for recording audio. In the 1950s, magnetic recording of digital computer data on plastic tape coated with iron oxide was invented. In 1960, IBM used the magnetic tape idea to develop a reliable way of securing magnetic stripes to plastic cards, under a contract with the US government for a security system. A number of International Organization for Standardization standards, ISO/IEC 7810, ISO/IEC 7811, ISO/IEC 7812, ISO/IEC 7813, ISO 8583, and ISO/IEC 4909, now define the physical properties of the card, including size, flexibility, location of the magstripe, magnetic characteristics, and data formats. They also provide the standards for financial cards, including the allocation of card number ranges to different card issuing institutions.
(Note – Few information taken from how stuff works & Wikipedia for fair use only)
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