If you’ve just been issued a new credit card or even a debit card, you might be confused about the Wi-Fi-like symbol that would usually appear top left or right corner. Actually, there’s nothing to be confused about. Congratulations, you’ve just gotten your first contactless credit card or debit card.
This might make you wonder, what’re exactly contactless credit cards or even contactless debit cards. If that’s your case, continue reading. Because in this article, I will be providing you with a complete guide on what are contactless credit cards and how do contactless credit cards work.
What are Contactless Credit Cards Cards?
Contactless credit cards are like regular credit cards. However, they have an electronic chip which carries all your details such as name and bank details. The electronic chip works on what is known as Radio Frequency Identity Designation (RFID).
This means, when the card comes in contact with an RFID device, it gives limited details about your name and bank account to complete the transaction over wireless.
This means, there's no need to swipe the card because the radio signals from the electronic chip will transmit them to the Point of Sale machine over wireless frequency when it comes in very close contact.
Also read: 15 Best Contactless Payment Apps in 2021
Why Contactless Cards?
Of course, you will wonder why should your bank or credit union or any other issuer provide a contactless credit card or contactless debit card, especially when the older types are working well. There’re several reasons actually and I will enumerate them.
1. High Cost of Replacing Magnetic Stripe Cards
The earlier type of credit cards and debit cards would come with a magnetic stripe on the reverse. Maybe you have one of those too. The magnetic stripe carries all coded information about you such as your bank account number and the balance, name, and other details.
When it is swiped at a Point-of-Sale or POS machine, your details are captured automatically and they’re sent to the bank for verification and payment.
However, there’s one major glitch with magnetic stripe credit cards and debit cards. And that’s the magnetic strip can get damaged or unreadable over a period of use. This means, you won’t be able to use the card at a POS machine or even withdraw cash, because your details stored on the magnetic strip wouldn’t be available.
As a result, credit card and debit card issuers had to issue newer cards for customers to replace those with worn-out magnetic strips. This translates as a huge expense to you and the issuer.
2. Better Safety for Customers
Furthermore, banks and credit unions also issue contactless credit cards and contactless debit cards to provide you with more safety. Unlike magnetic stripe credit cards and debit cards, you don’t have to actually hand them over to a cashier to process at a POS machine.
As a matter of fact, your contactless credit card or contactless debit card needn’t even leave your hands at any point in time. All you have to do is hold them near the Radio Frequency Identifier (RFID) antenna by waving the contactless credit card or contactless debit card on the POS machine to make a transaction.
The older, magnetic strip credit cards and debit cards would have to be handed over physically to the cashier for processing the transaction on a POS machine. At some places, they would also use the swipe machines to take imprints of your credit card, where POS machines aren’t available.
This is a high risk since any unscrupulous cashier could swipe your card multiple times for purchases you’ve never made or use the imprints for more fraudulent purchases at your expense. All these risks are negated by contactless credit cards and contactless debit cards.
3. Phased Withdrawal of Old POS Machines
Worldwide, banks and card issuers such as Visa, Mastercard, Discover, American Express, and Diners, to name a few, are asking banks and credit unions to withdraw their older POS machines that could process only cards with magnetic strips.
And they’re replacing these machines with newer ones that accept contactless cards as well as those with magnetic strips. If you notice the reverse of your contactless credit card or contactless debit card, you’ll find that the magnetic stripe remains.
As a result of the withdrawal of these older machines, most merchant establishments are using the new contactless POS machines. And banks and card issuers want to ensure your safety by providing them.
Therefore, even if you’re traveling abroad with a contactless credit card or debit card, you needn’t worry about whether a contactless POS machine would be available. If it’s not available, you’ll still be able to pay using the magnetic strip reader on the POS machine.
Using Contactless Credit and Contactless Debit Cards
Now that you’re aware of why banks and credit unions issue contactless credit cards and contactless debit cards, let’s understand how do contactless cards work.
1. Look for the NFC/ RFID Symbol
Store and cash counters where contactless credit cards and contactless debit cards are accepted usually display a symbol that looks somewhat like a Wi-Fi symbol. These are the symbols of Near Field Communication (NFC) and Radio Frequency Identifier (RFID).
That means you can make contactless payments there. Use these counters because usually, the crowds would be lower. Not everyone has a contactless credit card or contactless debit card. So, chances are that you will not come across a long queue to pay for your purchases.
2. Wave the Contactless Card
As I mentioned earlier, your contactless credit card or contactless debit card needn’t leave your hands. All you have to do is wave the contactless card near the RFID reader on the POS machine.
The POS machine automatically captures your details in less than 10 seconds and creates a special code for the transaction. You don’t have to do anything else. The machine will generate your receipt of payment when the transaction is successful.
3. Usage at Non-RFID POS Machines
You can also use your contactless credit card or contactless debit card at regular, older-type POS machines. In such cases though, you’ll have to hand over your contactless credit card or contactless debit card to the cashier to swipe and make a transaction.
However, in such cases, you’ll have to take all precautions that’re common when using the older versions of credit cards with magnetic strips, such as ensuring that the card isn’t swiped twice and never letting the card go out of your sight.
4. Contactless Payments with Limits
In some countries and at some places in America, you might come across stores that accept only a certain amount of money for contactless transactions. In such cases, you would have to request the cashier to divide your bill.
Generally, this shouldn’t happen but, in some countries where RFID is new, banks and financial institutions are making it a rule that no amount more than $30 can be debited through contactless credit cards and contactless debit cards.
That way, they assure customers that even in the unlikely event of a fraudulent transaction, their losses would be minimal. In other cases, you would have to enter your Personal Identification Number (PIN) to approve a larger payment.
Myths Regarding Contactless Cards
Unfortunately, there’re lots of myths and rumors about contactless credit cards and contactless debit cards. All of these myths are false and you can use a contactless credit card and contactless debit card without any fear.
Here’re some of the common myths regarding contactless credit cards and contactless debit cards.
1. Anyone can steal money from contactless credit cards or debit cards.
This is false. Nobody can steal money from your contactless credit card or contactless debit card. That’s because the NFC/ RFID works only when your card is less than two inches away from the antenna. That means anyone with an RFID machine can’t merely capture your details and make a fraudulent transaction. Furthermore, if you do feel that you’ve been cheated, alert your bank immediately to block payment and revert the amount to your account.
2. You can be mistakenly charged if you walk near a contactless POS.
This is also a myth. Merely walking past a POS with NFC/ RFID doesn’t cause your contactless credit card or contactless debit card to be charged. As I mentioned earlier, your card has to be less than two inches away from the NFC/ RFID antenna of the POS machine. And chances are, you won’t be coming anywhere as close as that while at a store or other place.
3. You need special wallets and purses to protect your contactless cards against fraud.
That you need special wallets or purses to carry your contactless credit card or contactless debit card is a myth that seems to be allegedly floated by companies making such stuff. There’s no need to use a special RFID-proof wallet or purse. That’s because you won’t be coming even two inches near an NFC/ RFID machine during the day for any transaction to occur. Any wallet and purse are suitable to carry your contactless credit card or contactless debit card.
4. Contactless credit cards can leak personal information
This is an absolute myth. Nobody can steal your personal information from a contactless debit card or contactless credit card, even with the most sophisticated technology. And to do so, that would require a rather large NFC/ RFID antenna that would be visible to almost everyone. Furthermore, even if that happens, the information that anyone can get from your contactless credit card or contactless debit card would prove useless to cheat you out of money or identity thefts.
As you can see from my complete guide on what’re contactless credit cards and debit cards, there’s nothing to fear when using one. In fact, contactless credit cards and debit cards are expected to become widely popular around the world by 2025. And in America, most stores are using contactless POS already.
Let me assure you that cases, where a contactless credit card or debit card has been used for fraudulent transactions, are extremely rare and have occurred only due to the carelessness of the cardholders. Usually, you cannot make two contactless credit cards or contactless debit card transactions at the same time. There’s a mandatory pause of 30 seconds to two minutes before the card can be used again. Therefore, use your contactless credit card or debit card without fear.