eli5 How did Credit/Debit Cards work before Chip & Pin Machines?
Basically the same way magnetic stripe cards still work today:
The information off the magnetic stripe is captured by the reader submitted to the network to obtain an authorization
The magnetic stripe on the back of the card contains the card number, the name on the account, and some additional data. It’s read by a read-head similar to the ones in cassette tape players. The device that scans the card can make a phone call or Internet connection to the card processor, who knows how to charge your account.
Before *that*, the store would use a machine that imprints the raised numbers from the card onto a paper slip; then collect and turn those paper slips in to the bank to get their money.
There was a book of known bad card numbers and you could call an 800 number to get an Auth (or at least check if card was bad). Later with modems the register would call. This was in very early 1980’s.
You used to get £50 for spotting and retaining a stolen card! That was 30 years ago, so worth quite a lot.
I worked in shops while I was a student, and most would have a “floor limit” which meant if it was over you needed to call for authorisation. You could also call if the customer looked dodgy.
Originally, the merchant had a small clipboard-like device with a roller. They’d place the card down, and a special piece of paper on top of it, then run the roller overtop which would imprint the card numbers onto the paper. They’d save all these records and then mail them to the bank.
Then the information was contained in a magnetic strip like you see on the back of gift cards today which could be read by an electronic card reader when swiped.