Have you ever wondered what those first four to six numbers on your credit card mean? They’re called a bank identification number (BIN), and they uniquely identify the institution issuing the card. In this post, we’ll explain why BINs are important and how to use them.
BINs are key in the process of matching transactions to the issuer of the charge card. This numbering system also applies to charge cards, gift cards, debit cards, prepaid cards and even electronic benefit cards. This numbering system helps identify identity theft or potential security breaches by comparing the cardholder’s information with what is on file with the issuer.
When a customer makes a purchase using a credit or debit card, the merchant sends an authorization request to the card issuer. The issuer then approves or declines the request based on several factors, including whether the account is in good standing, whether the transaction amount exceeds the available credit limit, and whether the cardholder’s information matches what is on file.
If the transaction is approved, the issuer returns an authorization code to the merchant. The merchant then submits a batch settlement request to their bank, which includes all of the day’s approved transactions. The acquiring bank then forwards that request to the card issuer for payment processing. Once the issuer receives the batch settlement request, they compare each transaction to their records to ensure that everything matches up.
The BIN is an important part of this process because it helps issuers quickly identify which transactions belong to their cardholders. Without BINs, issuers would have a much more difficult time processing transactions and distinguishing between legitimate charges and fraudsters trying to use someone else’s credit or debit card information.
