Definition
The three-digit code on the back of the credit card is also known as the "CVV2 code" or "verification code."
On American Express cards, this verification code is listed on the front of the card, not the back.
The three-digit codes aren't magnetized, so they're not scanned when swiped. Merchants aren't permitted to save these three-digit codes.
Purpose
Credit cards' three-digit codes serve a key purpose: to protect consumers from credit card fraud. When making a purchase in person,
merchants take precautions to make sure the person swiping the card is the cardholder by asking for identification.
If you make a purchase online or by phone, merchants can't easily verify whether or not the customer is the legitimate cardholder.
To protect cardholders against fraud, merchants ask for the three-digit code as a way to verify that the person making the purchase has the card in hand.
A criminal who learned your credit card number by combing through your mailbox or peering over your shoulder in line at the
grocery store can't easily learn the secret three-digit code, as it appears on the back of the card, doesn't appear on your account
information and isn't scanned along with your credit card number at the cash register. A criminal attempting to use your
credit card number in an online or telephone transaction can try to guess what your three-digit number is, but incorrect entries will
result in the purchase being denied.