Contactless cards: how they work

Contactless credit cards are now quite common in the US. So how do these next generation chip cards work and how do they differ?

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

“They eliminate the need to swipe at the checkout or dip the card into the terminal,” he says.

Contactless cards allow you to make payments by presenting the card to a contactless terminal at the point of sale, instead of inserting or swiping it.

For now, let’s assume that most issuers offer contactless cards. If your current card does not support contactless technology, call your issuer and ask if you can request a replacement contactless card.

What is a contactless card?

A contactless card is a smart card with embedded technology that allows you to pay over a secure radio interface, similar to Apple Pay, Android Pay or other mobile wallets.

How do contactless credit cards work?

Contactless cards have “a payment application, itself, built into the card,” says Melanie Gluck, vice president of security solutions at Mastercard.

“The antenna works when it is close to the reader and allows information to be transmitted to the point of sale terminal.”

You must be inside close Proximity—about three inches—to a contactless-enabled credit card terminal so that the radio antenna picks up your card signal.

Contactless cards are called dual interface cards because they contain a standard EMV chip and contactless technology. So consumers can use either method depending on which interface merchants are using.

How do you know if your card is contactless?

So, how do you know if a card is contactless? Easy: The front of your card will display a contactless symbol – four curved lines that increase in size from left to right.

And to tell if a merchant supports contactless, “just look at the contactless payment symbol at the checkout,” Muadeb says.

How to use a contactless card

When you go to pay, simply place your card within a few inches of the checkout screen. Depending on the screen, you will either click on it, either above it or below it. When you touch your contactless chip card, a cryptographic code is generated that is unique to the card and transaction.

“The cryptogram can only be decrypted by your bank to verify your transaction,” says Jack Jania, vice president of product management and innovation at CPI Card Group. “It’s impossible to replay.”

“The bank decides, ‘This is one of my cards, and this is one of my clients’ transactions.’ It’s a handshake between the POS and the card issuer,” she says.

“All this magic happens in literally 300 milliseconds.”

Where can I use my contactless card?

You can use your contactless card at stores throughout the US and generally anywhere from fast food outlets to convenience stores, grocery stores, and vending machines. And in some cities like New York, Portland, Chicago and Miami, you can even use them as public transport.

Each credit card network sets a dollar limit for Click-to-Run transactions. Mastercard, for example, has a $200 limit on contactless payments. If the consumer exceeds the card issuer’s limit, he or she enters their PIN for added security.

The contactless card “is designed for lower values, for speed and convenience. It is not intended for large purchases,” Gluck says.

bottom line

When you use a contactless card, you just click and go. Just keep in mind that you will be using this feature to make small purchases. Think: gas stations, convenience stores, grab a bite to eat, or buy a bus or subway ticket where possible.

Advantage? According to experts, you will spend less time waiting in line at the checkout.

*All American Express Cash magnetic card information has been independently collected by CreditCards.com. The Issuer has not provided the content and is not responsible for its accuracy.