The Contactless Credit Card Explained

If it seems like every few years there's a new way to pay at the cash register, you're onto something. And today, the contactless credit card is having its moment. 

While contactless cards have recently seen steady growth overseas, they're still relatively new to the United States, and with widespread use comes plenty of questions about how this new payment method works and whether it’s secure.

Fear not! Here's everything you need to know to become the master of your contactless card. 

Understanding contactless payment 

We should start by explaining what "contactless payment" really means. Basically, it's a payment method that lets you use a credit or debit card without swiping or inserting it into a machine. 

Calling this method "contactless" is sort of misleading, since you still have to take your card out and hold it extremely close to the reader. In fact, you might have seen it referred to as "tap to pay". But since the two don't technically need to be touching, the name sticks. 

Contactless payment is made possible using what's known as radio frequency identification technology (which we'll get to later). This technology has been around for decades but wasn't really adopted by banks until 2015. Now, consumers turn to it as an easy way to make purchases in seconds. 

What is a contactless credit card? 

If you have a smartphone, you're probably familiar with the concept of an electronic wallet. It's pretty simple—you add your card's info to the app, then hold your phone near the reader when it's time to pay. A contactless  credit card works like this but without the middleman. 

Contactless cards contain the same transmitting technology as your smartphone. So when you need to pay, just pull your card out and tap it against the reader. In most cases you won't even be asked for your pin, speeding up the process even more. 

But not every card can use the no-touch method. Similar to the insertable chip, contactless cards have special chips of their own. These make it possible for compatible card readers to locate them, so you can just tap and go. 

What about debit? 

The latest card technology isn't limited to credit alone. A contactless debit card works just like its credited counterpart. Just hold it near the card reader to pay—no need to swipe or insert. 

To get a contactless debit card, look for a bank account that offers touch-free payment, like the Varo Bank Account. 

How contactless cards work 

Now that you know what contactless cards do, let's dive a little deeper into how they actually work. Luckily, it's a pretty simple process, even for those who aren't technologically minded. 

To start, we should establish what radio frequency identification (RFID) technology is. In basic terms, it's a form of tech that uses electromagnetic waves to track tiny radio tags. What's really important here is near-field communication (NFC)—a form of RFID that allows two electronic devices to share information. 

Still with us? NFC tech is what lets your contactless card "talk" to the machine reader when you make a payment. And unlike other RFIDs, NFCs can only transmit across a small distance—hence the "tap to pay." 

Inside every contactless card is an electromagnetic chip containing your card's identifying information. When you make a payment, the reader searches for a signal and latches onto your card, which transfers the info in seconds. 

Using your contactless credit card 

Putting your contactless card into action is pretty simple, but let's break it down for extra clarity. 

To start, the merchant you're paying must have a contactless-compatible card reader. If not, there will be no NFC to receive your payment information. In most cases, either the merchant or the reader itself will let you know if you're okay to tap. 

Speaking of tapping, you don't actually have to touch your card to the machine reader. Simply hold it close and let the electromagnetic waves do their thing. 

The NFC range is pretty short, but keep your wallet or purse at a slight distance while you pay. If you have more than one contactless credit card close by, the reader might link up with the wrong one. To avoid this headache, make sure it can only reach the card you intend to use. 

Is your card contactless? 

Using a contactless card is as easy as pie. But wait. How do you know if your card is contactless in the first place? 

This payment method has been around for a few years now, so any relatively new cards might have no-touch powers. Luckily, there's an easy way to find out for sure. 

All contactless cards will have a unique symbol letting you know of their NFC compatibility. It looks like a series of curved lines—basically, a Wi-Fi symbol turned on its side—and is usually on the card's backside. Find it and you'll know you've got a contactless card. 

Are contactless cards safe and secure? 

No-touch payment is a great idea in theory. But are contactless cards actually safe? 

It's natural to question the safety of a brand-new payment method, especially one that sends sensitive information across invisible waves. But in reality, contactless cards are one of the safest forms of payment out there. 

It's extremely difficult for hackers to intercept your contactless payment. In fact, the standard magnetic strip that runs across credit cards is actually much easier to duplicate. 

By far, the easiest way for someone to take advantage of your contactless card is to steal the entire thing completely. So keep track of your card as usual, and you should have no trouble. 

Securing contactless payment 

Even though contactless payment is hard for hackers to infiltrate, credit companies don't like to take risks. For that reason, no-touch cards are typically given some extra security measures, just to be safe. Here's how your contactless credit card stays secure. 

The one-time code 

The contactless chip in your credit card does more than transmit information. For every transaction, it creates a unique one-time code. As you pay, it transmits this code and your account number to the receiver—no additional info required like a PIN or signature. 

With this system, everything from your name to your address stays out of the equation. In the rare event that someone were to infiltrate the payment system, they wouldn't have enough information to do much damage. And thanks to the complex algorithms used by most banks, thieves are unlikely to have the resources needed to crack the codes anyway. 

Compared to regular cards, the one-time code system adds an extra layer of security to contactless models. And since it's completely automatic, you can make purchases knowing your card is built to keep your account safe. 

Physical card security 

Scammers use a technique called skimming to steal data from credit cards. Basically, it involves using a skimming device to collect the information deposited when the card's magnetic strip is swiped. These strips can then be duplicated and used to make fraudulent purchases. 

Unfortunately, your card's insertable chip is also vulnerable to skimming devices. This means you could take on a slight risk every time your card makes contact with a machine reader. 

Obviously, a contactless card reduces the risk of contact-based fraud. The less your card touches a reader, the less likely you are to become a victim of skimming. 

For the forgetful types, it's worth noting that contactless payment could also reduce the chance you'll leave your card behind. And if it never leaves your hand, it's less likely that a thief will get to it either. 

The perks of contactless cards 

Besides being safe and secure, contactless cards come with a host of extra benefits. From added cleanliness to easy vacation spending, this payment method does more than save you a few seconds at the register. Here are some perks you can look forward to when you open a touch-free card. 

Increased speed 

Picture this—you've run to the store for a last-minute purchase. But before you can grab your bags and go, you're forced to stop and type your pin into the card reader. Bonus points if the chip reader was broken and you had to swipe the card three times before you could pay. 

While inserting your card might seem more convenient than swiping, it really isn't any faster. It takes a few beats for the machine to read the chip, and this is before you've entered your four-digit code. 

With a contactless card, you can say goodbye to long, drawn-out register experiences. NFC transmissions take seconds to finish and usually don't require your pin. So all you have to do is tap and go—no awkward small talk with the cashier necessary if that’s not your thing. 

Less surface contact 

In the wake of a pandemic, most people are more aware of the germs they encounter on a daily basis. And unfortunately, few public surfaces can be counted on.

The beauty of the contactless card is that you don't actually have to tap your card to "tap and go." And with no need to enter your pin, neither you nor your card needs to touch the machine reader at all. While it might seem like a small perk, you'll be grateful for the reduced surface contact during cold and flu season. 

Reduced wear and tear 

By the time your card reaches its expiration date, it's likely seen a few things. Repeated swipes and insertions are likely to leave it scratched, scuffed, and worn. 

Besides being an eyesore, excessive wear and tear can make your card difficult to use. Both magnetic strips and chips can be worn down with too much use, and as they wear, your time spent at the register grows. Over time, this could lead to repeated panic as your card fails you at the critical point of payment. 

Contactless cards could virtually eliminate this problem. Little surface contact means these cards don't suffer from the same wear and remain in good condition until their expiration date. That way, you won't be left stranded at checkout by a card that can't hold up. 

Easy overseas spending 

Contactless credit cards first rose in popularity overseas, and it remains the preferred choice of payment in many countries to this day. On many continents (like Europe and Australia), no-touch cards have replaced chips and swipes as the default method. 

If you enjoy traveling, a contactless card could become one of your vacation essentials. In some areas, they may be the only accepted form of payment. Opening one now means you'll be ready when the travel bug bites. 

Now that you're an expert on contactless cards, it's time to find one of your own. Luckily, Varo has you covered with contactless credit and debit cards. Sign up today to start paying with a single tap.