Contactless Credit Cards and Payments: The Good, the Bad, and the Ugly (2023)

Visa, Mastercard, and Europay brought the chip card to American wallets when they shifted fraud liability to whichever party (the merchant or bank) had the lesser technology (such as cards without chips, or terminals that couldn’t read them). Banks had to put chips in their credit cards, stores had to get terminals that could read them, and you had to get used to dipping. The whole thing felt much slower.

Since then, many banks have turned the chip card into a magic wand of sorts: Now all you have to do to buy something is wave (or tap) your credit card, phone, or smartwatch (you can connect those devices to a card of your choice) in front of a chip-enabled reader. Swiping has become something we do only when the payment terminal won’t let you dip or tap.

Apple, Google, and Starbucks (through their apps) have led the charge in mobile payments, while the recently launched Apple Card shows that banks, by way of offering more rewards, may be trying to habituate shoppers into tilting their devices at checkout.

Contactless payments exploded in popularity in spring 2020, when the coronavirus upended how many people think about paying for things. In an April survey by Mastercardof 17,000 consumers in 19 countries, 82% of respondents said they view contactless payments as “the cleaner way to pay.”

But there’s more good behind the shift than just reducing the amount of stuff you touch. Chip cards and so-called contactless credit cards have become the norm in many places overseas, as they can make it harder for thieves to steal your information compared with magnetic-stripe cards. For instance, mobile payments and contactless cards don’t transmit your name, card number, or three-digit security code.

When contactless payments are absolutely useful

Andrew Davidson, chief insights officer and senior vice president at Mintel Comperemedia, wanted to hop on the London Tube this past summer but didn’t have a contactless credit card. He went to the kiosk, but it wouldn’t take his card either. He finally had to queue up at the window for help.

“I was a little bit frustrated my card hadn’t been updated [to a contactless card],” said Davidson.

This is the promise of contactless cards: facilitating a swift transaction that lets you avoid tedious lines and unpleasant ticket officers. For example, the New York City subway system launched a pilot program earlier this year to allow people to use contactless cards or mobile wallets to purchase fares.

Of course, not everyone takes the train to work every day. But imagine traveling in Europe, or in the Big Apple, and realizing you can avoid an anxious transaction thanks entirely to your card. That’s why, at the very least, you should call your issuer to see if it can switch out your existing card for a contactless one. (They look the same, except for a little icon that resembles the Wi-Fi waves on your laptop or cell phone.)

Load your cards to your smartphone’s Wallet app, too, as an alternative. (If you use Apple Pay, download the Find My app—formerly Find My iPhone—in case you lose your phone.) There’s no harm in having this as a payment option, especially if you can skip a long “queue.”

When contactless payments are merely convenient

Making a card that both dips and taps to pay isn’t easy—just ask the president and CEO of credit card manufacturer CompoSecure, Jon Wilk, who employs scientists from the defense industry to get it right.

But when it works, it really works. My local coffee shop accepts contactless payments, and I’m able to flash my card over the reader and put it back in my wallet in a nanosecond, much more quickly than if I’d dipped it. I was skeptical that shaving a few seconds off my transaction would actually register with me, but it’s nice to not have to stand around, waiting to put your chip card back in your wallet.

Audit the retailers you frequent and identify the ones that accept contactless payments. (Again, look for that Wi-Fi-like icon.) Chip readers from Square—the payment processor whose app prompts you to leave a tip when you pay—typically accept them, so start there. You’ll get into the habit of knowing which card to use where, so you can avoid flailing around at the register and get to your next errand slightly faster.

When contactless payments are frustrating

Sometimes, contactless payments don’t go according to plan. For instance, my Blue Cash Preferred Card from American Express is a contactless card, but the reader at my supermarket, despite signaling that it accepts contactless payments, won’t take it. (I think it’s the reader’s fault.) It won’t read my dip, either, and I have to make three unsuccessful attempts at dipping before I’m prompted to swipe my card the old-fashioned way. (The things we do for more cash back at the grocery store.)

In the real world, picking not only which card to use but also how to use itrequires new levels of consideration that our already bleary brains may not need. And a lot of people aren’t biting: One 2019 report from market research firm Javelin found that just 39% of cardholders own at least one contactless payment card, while Mintel found in September 2019 that only a little more than a quarter of people made a mobile payment in the past year.

That means you’re probably still dipping your card, which is fine, especially since a lot of terminals don’t accept contactless payments. But dangling your phone or card in front of a reader is just quicker. Next time you’re in line for coffee, give it a shot. It’s the wave of the future.

Contactless payments are safe (at least as safe as dipping your card in a reader), but they’re not necessarily private.

Contactless cards have a computer chip and a tiny antenna they use to talk to a card reader when you want to buy something. To make that happen, the card sends the reader a one-time code, or token, with information that doesn’t expose your actual account details.The next time you go to buy something, it’ll send a different code.

Mobile payment service Apple Pay also uses so-called near-field communication (NFC). Using an NFC-equipped credit card is much safer than swiping a card with a magnetic stripe, which is why in-person credit card fraud is way down. Although it’s theoretically possible to steal this information, the Identity Theft Resource Center, a nonprofit that helps victims of identity fraud, says this kind of fraud “is just not a viable threat.”

Privacy is another matter. For example, when the New York City subway system released its contactless payment system, the Surveillance Technology Oversight Project, a nonprofit advocacy group that opposes discriminatory surveillance, released a report over its concerns about “the project’s weak privacy policy, its collection of a large amount of information, its ability to track users once they enter the system, and the possibility for it to be misused by government agencies to surveillance individuals.”

In a write-up on the STOP report, Curbed NYnotes that the MTA “also collects trip data from Metrocards, and trips can be connected to specific riders if they purchase one with a debit or credit card, and that information can be subpoenaed.”

If you’re uncomfortable with your data being available, consider using cash.

1. Andrew Davidson, chief insights officer and senior vice president at Mintel Comperemedia, phone interview, June 27, 2019

2. Jon Wilk, president and CEO of credit card manufacturer CompoSecure, phone interview, May 22, 2019