How does a magnetic stripe on the back of a credit card work?

The magnetic stripe is encoded with the card number; there is also other informtion encoded as well, which may include any limit the bank places upon purchases with the card, and the card's expiration date. The encoding itself isn't too different from the encoding used on old-fashioned tape drives that computers relied upon before disks. The card reader gathers this information when you swipe it through on an ATM machine, gas pump, or similar device, then "talks" with the appropriate bank to make sure that the customer is not over their credit limit, or that the card is still valid and has not been lost or stolen. If everything checks out, the transaction goes through, and you get your cash, or gas, or purchase.

Very OLD technoledgy. Its like a cassette tape recorder tape. The information contained in the strip is nothing more that the numbers on the card.

And so, its like dialing a phone number, to the accont holders card number.

It has all your info stored on it electronically so when they swipe it thru the machine they know who you are, where you bank and if you have any money in your account.