Businesses typically use magnetic strip cards – or magstripes – for gift and loyalty programs to protect sensitive information. Each card is encoded with a unique ID number that keeps track of cash balances, points earned, and customer information.

Magnetic strip cards feature a thin magnetic stripe, typically found on the back of credit cards and identification badges. This magnet acts as a recorder, absorbing and maintaining information like dollar value and personal information. The information on the card is encoded and can’t be read until it is activated at the point of purchase. By swiping the card through a credit card terminal or PC, you decrypt the information and the owner can start using it.

One benefit to using magnetic strip cards is the increased security. While these cards encrypt and maintain information, most magnetic strips won’t record vital account data such as PINs and passwords. This is to prevent unauthorized people with card readers and card reading equipment from gaining them access to your accounts.

You need to be careful with magnetic strip cards. If the cards are next to magnets, you risk erasing the information contained on the strip. Make sure to keep the card in dry, flat surfaces such as wallet sleeves to prevent bends and folds that could make the information difficult to read. Also, avoid leaving magnetic strip cards near hot surfaces since you can warp the strip. If the strip begins to fade or is difficult to read, request a replacement card immediately.