Everything You Need to Know About Contactless Payments

How Do Mobile Wallets and Contactless Cards Work?

Woman makes a payment with her mobile wallet in a rideshare
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Contactless payments allow you to make purchases without coming into contact with credit card terminals. The technology has been around for years, but consumers are showing more interest in no-contact payments due to COVID-19. Many grocery stores, restaurants, fast-food chains, and even some public transit systems in select cities now accept contactless payments—along with some ATMs. 

More customers are using contactless payments since COVID-19 began, according to 27% of small business owners surveyed by a payments industry consulting firm. According to a Mastercard survey, three-quarters of those surveyed say they’ll continue using contactless payments after the pandemic ends. 

Contactless payment usage grew 150% between March 2019 and March 2020—but some consumers are still unfamiliar with the technology. We’ll explain how contactless payments work, how to choose between the available options, how to get contactless payments set up, and finally, how to complete a transaction.

What Are Contactless Payments?

Contactless payment can be made with a contactless credit card (sometimes called a “tap to pay,” “tap to go,” and “tap and pay” card). You can also make contactless payments with a phone or watch’s mobile wallet, which holds your credit and debit cards. Contactless payments are generally for in-person purchases.

There are a few types of contactless pay systems. With mobile wallets, you’ll see the contactless payment symbol’s graphic of four curved lines will likely appear somewhere on the card or contactless-enabled credit card terminal. 

Your card, watch, or phone must usually be within 2 inches from the terminal, and some terminals require you to tap your card or hold it in place for up to two seconds. But if you accidentally touch it twice, you shouldn't be charged twice. 

A tiny antenna inside your phone sends a one-time “token” or unique identifier only usable for one transaction (not the actual number) to the payment terminal. A light or sound typically confirms that the purchase went through, and deducts money from your account.

This process happens quickly—up to 10 times faster than a standard transaction. 

Other types of contactless or touchless payment apps use a scannable code for checkout—Starbucks and Walmart apps are two examples. These codes only work inside the retailer, not for other purchases. 

Contactless Card vs. Contactless App Payments

Which method of payment is right for you? You can use both a card from a mobile wallet and a physical card, depending upon the circumstance. 

Contactless Card Payment

Plastic credit and debit cards with built-in contactless technology don’t require set up, and all four of the major networks (Visa, Mastercard, Discover, and American Express) issue contactless cards. 

The four curved lines symbol on the card indicates it can be used for contactless transactions. If you’re unsure, check with your credit card issuer to learn whether contactless cards are available and order a card. 

One of plastic’s big benefits—if a store doesn’t accept contactless payments, you can still swipe your card or insert it. The downside is that you still need to carry the card around. 

Contactless Payment With an App

You can leave your wallet at home and pay by holding your phone near a payment terminal. 

Mobile wallet apps: With a payment-enabled smartphone or wearable device you can load multiple cards, and set a frequently-used default card in your mobile wallet app. With some, you can even remove money from an ATM—as long as the ATM supports contactless transactions. Mobile wallet apps include:

  • Apple Pay for iPhones and Apple Watches
  • Google Pay for Android-enabled phones and watches
  • Samsung Pay for Samsung phones 
  • LG PayQuick for LG phones, which also works contactless at magnetic readers
  • Garmin Pay for Garmin smartwatches
  • Fitbit Pay for Fitbit smartwatches 

Retail apps: Some retailers also have their own contactless apps that allow you to pay at checkout with a reloadable gift card, or your credit or debit cards. Two examples:

  • Starbucks App, which works on a variety of devices, including Fitbit watches
  • Walmart Pay within the Walmart App, for Apple and Android

Smartphones and smartwatches offer an additional level of security for contactless payments. Your unique Face ID, PIN, or fingerprint are required to unlock the device and allow you to make secure payments and provide protection against fraudulent card use.

Contactless app drawbacks include: 

  • Some merchants don’t accept contactless payments, and if you only have your smartphone or watch, you could get stuck somewhere without a payment method. 
  • You must take the time to set up your mobile wallet and load your cards before using the wallet for the first time, and it can take time to unlock a watch or device with a PIN at the register.
  • Some corporate and business card issuers restrict which cards are allowed to be loaded—for example, only business debit cards are allowed. 
  • Some retail apps only permit ordering and paying ahead of time, not in-person checkout. 

Credit Card and Mobile Wallet Rewards 

Contactless purchases continue to earn rewards offered by your credit card program, just like a traditional stripe-and-swipe card. If using a mobile wallet, you’ll need to select the card that rewards the purchase type you’re making, especially if it’s not your mobile wallet’s default card. 

Some rewards credit cards even offer increased rewards for contactless payments. See our best rewards credit cards page to compare rewards-earning credit cards.

Some mobile wallets may also offer rewards, at times. For example, Samsung Pay rewards some users based on the number of qualified transactions made using eligible cards. 

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