What Does it Mean to Validate a Credit Card?

With the option to make purchases online, more customers are using credit cards and more merchants are finding ways to accept credit card payments. While merchants who interact with their customers directly can view and handle credit cards, online merchants and those that accept credit card payments by phone must take steps to ensure that the credit cards they attempt to charge are valid.

Validating a credit card refers to the process of running a computer algorithm that performs calculations using a credit card's number. When the algorithm shows that the card is valid, it means only that the card number is among those that could potentially exist with a given credit card company. For example, a random series of numbers would likely result in an invalid answer from the program, while an actual card number, even from a card that has expired or reached its credit limit, would show up as valid, since the number is one that the credit card company issued.

To perform a credit card validation, a merchant only needs to type the credit card number, which is between 13 and 16 digits, depending on the credit card company, into a computer program that runs the algorithm. Some simple validation algorithms are possible to perform by hand, but the likelihood of error is much greater. The algorithm uses a check digit, which is a digit within the credit card number, to ensure validity based on a series of arithmetic computations using the other numbers in the sequence. The first four digits of the credit card also signify the card company. For example, all Discover credit cards begin with the sequence 6011. Merchants can check this portion of the card manually, though users can also easily submit false numbers that contain the correct opening sequence.

The primary use of credit card validation is to allow merchants to spot false credit card numbers before requesting an authorization from the credit card company. Merchants who suspect a case of fraud can identify fraudulent payment information more quickly and avoid the time and money losses associated with beginning to process an order that has no chance of being completed.

Credit card validation is the first step in accepting a credit card payment. Following a successful validation, a merchant will input the card number into a merchant software program or credit card machine, which sends the account number to the credit card issuer for authorization. This is the point in the process where a card may be rejected for insufficient remaining credit. Credit card companies will also decline expired cards or cards that represent closed accounts. Successful authorization allows the merchant to place a charge, which completes the initial transaction. Future transactions, such as chargebacks and refunds, remain options for cases of returns or processing errors.