How Credit Card Number are Generated?

How Credit Card Number are Generated?
Credit plastic card with emv chip. Contactless payment.

Ever wonder how a credit card number is generated? Well, on this post I am going to share to you how they are generated. One thing is for sure is that they are not generated randomly. It takes process and formula to generate a credit card.

The Luhn Algorithm to Generate a Valid Credit Card

Are you people aware of the credit card number and Luhn algorithm? The latter might sound a little tricky but is easy to understand. Financial institutions in the transaction process use these terminologies. These terminologies work entirely on computer-based systematized languages.

What is Luhn Algorithm

Luhn algorithm is a computer-generated algorithm used to check the identification number of a user. A user is asked to enter the identification number to proceed with the online transaction. When the identification number reaches the system of the institution, it gets verified. To verify whether the identification number sent by the individual is accurate or not Luhn algorithm is used.

The algorithm is designed mainly to check the accuracy of the number of the account holder. It is primarily done to avoid fraudulent practices of hackers. This algorithm is used almost by every payment mode and transaction gateways. 

On this image it explain how luhn algorithm works.

History of Luhn Algorithm

The developer of this algorithm is Mr. Luhn. Hans Peter Lunch is a German scientist expert in computer science who developed this algorithm in 1954. The algorithm tested a great deal of identification numbers before coming into action. Moreover, the algorithm checks for the accurate identification number entered by the user. The algorithm rejects the transaction request if the algorithm does not approve the identification number.

This happens mainly when the user enters an inappropriate or wrong identification number during the transaction process. The algorithm runs the identification with the flow of its pattern. If the identification number is right, the process will be carried forward. And if the identification number is invalid, the algorithm stops, and by default, the transaction gets canceled. Yes, No and default are the terminologies used in algorithm language. The main functions of computer algorithms are based on the gateways of arrays. 

How Credit Card Number is Generated?

A credit card number is the identification number of the cardholder. The cardholder is basically the account holder of a bank. The financial institution provides the user with a credit card for a smooth transaction from anywhere. To make the transaction, the user has to enter the number of the card he holds. The number basically acts as a user name for the transaction. You will find this number imprinted on the front side of the card.

A credit card number is a 16 – 19 digit number. Different transaction cards have a different digit of numbers, but the minimum figure has 16. The credit card number is divided into four parts of 4 digits each.

  • The first four digits are called the system number.  
  • The second four digits are called the bank number.
  • The third four digits are called as the account number.
  • The fourth four digits are called a check digit.

Every segment has a different role to perform during the transaction. After reading this, you might find it complicated and even think why their variations are necessary. The main reason to do so is to protect the transaction of the user from the third party. Every individual relies on the bank for their financial transactions. Thus it is the service that the bank renders to its customers. 

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