Most traders have electronic systems that read the card details and dial the card issuer for instant electronic verification that the card is valid and has sufficient credit. All the card details are held either in a magnetic strip on the back of the card, which is swiped in the trader’s system, or more commonly nowadays in an electronic chip that is read when the card is slotted into position in the system. With the older style magnetic strip cards the cardholder’s signature is required to confirm the transaction, whereas with chip cards it’s the cardholder’s PIN that must be entered, which is regarded as being more secure. Such cards are commonly known as ‘Chip and PIN’.

The cardholder doesn’t have to make credit card purchases in person though – it’s also possible to pay by telephone or online. Such types of payment method are more liable to fraud as it’s not possible to verify the card details by either signature or PIN. However, security checks are still carried out, such as asking for the three-digit security code on the back of the card, which helps to verify that the person making the purchase holds the card. Other cardholder details will be checked to ensure that they match up, such as the billing address.