What are Contactless Payments?

If you're wondering what are contactless payments, let this free lesson help explain what they are and how they work.

What are contactless payments?

If you have a credit or debit card, you're probably pretty familiar with the steps needed to use one: Swipe your card, provide a pin number or signature, then accept the transaction.

swiping a debit card

When you do this, you're using a magnetic strip on the back of the card to send information to the card reader. But in recent years, magnetic strips have proved increasingly vulnerable to attacks from hackers. As a result, many banks, credit card companies, and retailers have started moving toward a different option: contactless payments.

making a contactless payment

A contactless payment is one you can make without a magnetic strip. Instead, you'll simply hold the card next to the card reader, or insert the card into a special slot at the bottom; it will then transmit the payment information wirelessly. To do this, many new credit and debit cards now include a special chip that uses Near Field Communication—called NFC for short.

As more and more retailers start accepting contactless payments, they're likely to become a new standard that will eventually replace magnetic strips. However, most cards still include a magnetic strip so you can use them at places that don't accept contactless payments.

How secure are contactless payments?

Generally speaking, contactless payments are more secure than magnetic strip payments. That's because it's much harder for hackers to intercept the information that's sent from your card to the card reader. Of course, just like a magnetic strip card, your card could always be lost or stolen, which means someone could use it to make an unauthorized purchase. If you think you've lost your card, be sure to report it immediately to your bank or credit card company.

How to make a contactless payment:

  1. Look for the symbol below on your card and the card reader.

    contactless payment symbol
  2. Hold your card next to the symbol on the card reader and wait for confirmation on the screen. That's it!

In some cases, you may also be asked for a pin number or signature. Some machines may instead require you to insert your card into a special slot at the bottom.

Other contactless payment options

In addition to contactless payment cards, other companies have started to introduce their own NFC-based options. For example, you may be able to use apps like PayPal Mobile, Google Wallet, or Apple Pay to pay with your smartphone instead of a card. These should work wherever you see the contactless payment symbol shown above. Also note that only the most recent smartphones currently include the NFC chip needed for these apps to work. However, these are likely to become more common in the next few years.