Contactless cards: How they work

Contactless credit cards are flowing in the U.S. now: How do these next-generation chip cards work and what is different about them?

“Contactless cards make the payment process easier and more efficient,” says Daniel Mouadeb, senior vice president, head of Mainstreet Card at Capital One.

“They eliminate the need for swiping at checkout or dipping your card into the terminal.”

The Capital One SavorOne Cash Rewards Credit Card comes with contactless technology, “which allows people to make payments by ‘tapping’ their cards in close proximity to contactless-enabled credit card terminals,” Capital One says.

Other cards that offer contactless functionality include Costco Anywhere Visa® Card by Citi, Chase Sapphire Reserve, Chase Freedom Flex℠, American Express® Gold Card, American Express Cash Magnet® Card* and Delta SkyMiles® Platinum American Express Card, among many others.

At this point, assume that most issuers offer contactless cards. If your current card doesn’t have contactless technology, call your issuer and ask if you can request a contactless replacement card.

How do contactless cards work?

A contactless card is a chip card that also has technology embedded in it that lets you pay over a secure radio interface, much like Apple Pay, Android Pay or other mobile wallets.

Contactless cards have “a payments app, per se, all built into the card,” says Melanie Gluck, vice president of security solutions at Mastercard.

“An antenna picks up when it’s close to a reader and allows info to be transmitted to the point-of-sale terminal.”

You have to be within close proximity – roughly three inches – to the contactless-enabled credit card terminal for the radio antenna to pick up your card’s signal.

Contactless cards are called dual interface cards because they contain the now standard EMV chip and contactless technology.

This way, consumers can use either method depending on what interface merchants are using.

“To determine if a merchant is contactless-enabled, just look for the contactless symbol at checkout,” Mouadeb says.

Your card, too, will have the waves symbol on the front.

How are contactless cards different from chip cards?

When you tap your contactless chip card, a cryptographic code that’s unique to the card and to the transaction is created.

“The cryptogram can only be decoded by your bank to validate your transaction. It cannot be replayed,” says Jack Jania, vice president product management and innovation at CPI Card Group.

“The bank decides, ‘This is one of my cards, and this is one of my clients’ transactions.’ It’s a handshake between the point-of-sale terminal and the card issuer.

“All of this magic happens in literally 300 milliseconds,” Jania says.

What are contactless cards best used for?

Contactless cards cater to those who are making smaller purchases – such as getting a coffee in the morning, a fast-food meal at lunch or fueling up on the way home.

And this technology is great for those who don’t want to swipe or dip their cards due to COVID-19.

Each credit card network sets a limit for tap-and-go transactions.

Mastercard, for example, has a $200 limit on contactless payments.

If a consumer exceeds the card issuer’s limit, he or she keys in their PIN for additional security.

A contactless card “is designed for lower values, for speed and convenience. It’s not meant for major purchases,” Gluck says.

How do contactless cards work?

Bottom line: Just tap and go but only with smaller purchases.

Think gas stations, convenience stores, grabbing lunch or buying a bus ticket or subway pass.

The advantage: Less time waiting in the checkout line, the experts say.

*All information about the American Express Cash Magnet Card has been collected independently by The issuer did not provide the content, nor is it responsible for its accuracy.

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