Credit card

Definition

A credit card is a payment card issued by financial institutions that allows the holder to borrow funds for purchases, up to a pre-approved limit. It is widely used in various transactions and involves paying back the borrowed amount with interest.

5 Must Know Facts For Your Next Test

1. Credit cards work on the principle of electromagnetic induction for secure transactions.
2. The magnetic stripe on a credit card stores data using tiny iron-based magnetic particles arranged in stripes.
3. Reading and writing data on a credit card's magnetic stripe involve changing the magnetization of these particles, which generates an electric current as per Faraday's Law of Induction.
4. Modern credit cards also use EMV chips, which rely on more advanced forms of electromagnetic induction for secure communication with point-of-sale terminals.
5. Skimming devices can exploit principles of electromagnetic induction to illegally read information from a credit card's magnetic stripe.

Review Questions

• How does electromagnetic induction make secure transactions possible with a credit card?
• What role do the magnetic particles play in the functioning of a credit card?
• Explain how EMV chips in modern credit cards enhance security using electromagnetic principles.

Related terms

Electromagnetic Induction: The process by which a change in magnetic field induces an electric current in a conductor.

Faraday's Law: $$\text{Faraday's Law states that the induced electromotive force (EMF) in any closed circuit is equal to the negative rate of change of the magnetic flux through the circuit.}$$

Magnetic Stripe: $\text{A band of iron-based magnetizable material on which data can be stored and read by modifying its magnetization.}$