More than 80% of Americans now use some form of contactless payment, such as a contactless credit card or debit card or a digital wallet feature. Tapping your card or phone when making a purchase has become much more common since the Covid-19 pandemic, and the growth of contactless payment is projected to continue.
While contactless payments have a number of benefits, there are also a few drawbacks to this payment method that it’s important to know about.
How Do Contactless Payments Work?
Contactless payment was born out of the credit card chip. Before then, most cards used the magnetic stripe, and consumers had to swipe at checkout.
When a chip card is inserted into a payment terminal, the machine reads the card’s security information, completing a safer transaction than the old swipe method. The payment terminal uses RFID (radio-frequency identification), to read the card’s chip.
When payment terminals were upgraded to read the chips, the technology grew by leaps and bounds. The tech that reads chips also enabled machines to accept payment with a simple tap from a card, phone with a mobile wallet, or even a watch.
Consumers can now connect their credit cards to their phone or smartwatch using technology like Apple Pay or Google Pay. Then they can tap to pay from their phone or watch at checkout.
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What Transactions Are Eligible for Contactless Payment?
For contactless credit card payment to work, both the terminal and card have to have the technology.
To determine if a payment terminal is contactless payment enabled, check for the symbol that looks like a WiFi signal turned on its side next to a hand with a card in it.
Nearly all plastic forms of payments, debit cards, and credit cards have a chip, but not all are eligible for contactless payment. To determine if your card is, look for the WiFi signal turned on its side somewhere on the card.
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Pros of Contactless Payment
Contactless payment comes with some pros for the cardholder:
• Ease of use. With contactless payment, users just have to tap their chosen payment method on the terminal. There’s no swiping or inserting for the transaction to go through.
• Speed. Since there’s no swiping or inserting, contactless payments tend to be faster.
• Leave the wallet at home. If smartphone users have uploaded their credit and debit card information to their phone, they can pay for things using their phone.
• Security. Contactless payment with chips is more secure than traditional magnetic-strip credit cards. Contactless payments are encrypted. This system makes it much harder for credit card scammers to steal people’s credit card information.
• Hygiene. Dollar bills are dirty and can serve as host to germs. Alternatives like contactless payments keep touching to a minimum.
Overall, contactless payment may make for faster transactions, and might not even require you to pull out your wallet.
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Cons of Contactless Payment
However, just like mobile banking has pros and cons, contactless payments do have some drawbacks, including:
• Glitches in technology. A card and point-of-sale system might not line up from time to time, resulting in glitches.
• It’s not available everywhere. While contactless payment is being adopted more and more, not every store has it. If there’s no symbol, customers will have to insert or even swipe to pay.
• Privacy. Contactless payment is generally secure, but when customers use payment apps on their smartphone or watch, they may be unknowingly sharing data from their device. In addition, scammers may also be able to skim a user’s credit card information from close proximity. You can buy protective sleeves and wallets to help prevent this.
• Limited transactions. It largely depends on bank policies, but because tap to pay doesn’t require authentication like signing or a PIN, there may be limits on withdrawals and purchase amounts. For more details on transaction limits, contact your bank or credit card company.
Recommended: Guide to Keeping Your Bank Account Safe Online
The Takeaway
While contactless payment isn’t foolproof, it can make purchasing transactions faster, easier, and more convenient. It’s also becoming commonplace as a payment method, and it’s more secure than cards with magnetic stripes. You can weigh the pros and cons of contactless payment to determine if it’s right for you.
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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
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