Contactless payments: What they are and how they work

Woman using her phone to payImage: Woman using her phone to pay

In a Nutshell

Contactless payments allow customers to make purchases without touching a keypad or handing their credit card over to a cashier. You can make a contactless payment using a mobile wallet on your smartphone or smartwatch — or you can use certain credit or debit cards equipped with contactless technology. Contactless payments are accepted in the U.S. and around the world at shops, restaurants, vending machines and more.
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Contactless payments could help speed up your checkout experiences — and provide a little extra personal space.

Using some credit or debit cards or even just your smartphone, you can make a contactless payment with a simple tap or wave over a payment terminal equipped with contactless technology.

Read on to find out how contactless payments work, where they’re accepted and whether this type of payment is secure.

How do contactless payments work?

You can make contactless payments with a contactless credit or debit card or with a mobile wallet or app. Another common term for contactless payment is “tap to pay.”

Contactless payment cards

Contactless payment cards are credit or debit cards that are equipped with nearfield communications, or NFC, technology. In order to make a contactless payment, both the card and the payment keypad, or terminal, at checkout must have NFC technology. Every time you make a purchase, a one-time security code is sent between the card in your hand and the payment terminal over a type of radio frequency.

If you’re curious whether your credit card is equipped with tap-to-pay tech, look for the contactless symbol on your card. That symbol is the same one that appears on a payment terminal with contactless payment capabilities. To pay, you may be able to tap your card on the payment terminal or hold it within one to two inches of the terminal for a few seconds — check with your credit card issuer to see how your card works.

Mobile wallet or app

You can also use your smartphone or smartwatch to make a contactless payment. Mobile wallets, like Apple Pay on iPhones and Apple Watches, Google Pay on Apple or Android devices and Samsung Pay on Samsung devices, store your card information. Similar to using a contactless credit or debit card, you can use your mobile wallet by holding your phone over a payment terminal with NFC technology for a few seconds or tapping the terminal with your phone or watch.

In addition to NFC, Samsung Pay offers magnetic secure transmission, or MST, which creates a magnetic signal. MST works with older magnetic card readers that don’t have NFC technology.

Where can I use contactless payments?

You can make contactless payments at stores, restaurants and other locations around the world — and they’re growing in popularity in the United States. Major credit card issuers, including Mastercard, Visa, Discover and American Express, offer contactless cards, and NFC-equipped payment terminals are now the norm for many businesses.

You can tap to pay at major retailers, pharmacies, grocery stores and restaurant chains. And some retailers, services and restaurants, such as Starbucks, Dunkin’ and Lyft, let you make contactless payments by using your mobile wallet within their mobile apps.

Contactless payments may also be accepted by mass transit systems and taxis as well as at vending machines, on college campuses and more, depending on the contactless payment method you use.

Are contactless payments safe?

The way contactless payments work is similar to the way that payments made with EMV chip cards work — and the methods provide similar levels of security.

When you make a contactless payment, a one-time code is sent to the payment terminal. This one-time transaction code is a substitute for your actual card number and makes it harder for someone else to steal and use it.

The use of dynamic, encrypted information makes contactless payments and chip cards more secure than cards with just magnetic strips. These strips contain information about your bank account that’s easier to copy.

Mobile wallets come with added layers of protection that are part of your mobile device, such as PIN verification, passwords and fingerprint and facial recognition. And it’s generally tougher to copy or steal a mobile wallet than a credit card or cash.

Next steps

If you want to begin making contactless payments, start by checking whether any of your cards have contactless technology. You may also be able to add your current credit or debit card to a mobile wallet on your smartphone.

Many major credit card issuers and banks also offer contactless cards. If you’re interested in getting one, be sure to shop around to identify which card might best fit your needs. Read our article on how to get a credit card for card-shopping tips.

About the author: Sarah Sidlow is a freelance writer and editor based near Detroit. She has a master’s degree in journalism from Georgetown University. Sarah’s work has appeared in Luxembourg’s national newspaper, Washington City Paper… Read more.