Is Contactless Payment a Wiser Choice?

A contactless payment is a safe, convenient way for you to buy groceries, your monthly transit commute, that new pair of boots – basically any goods and services – whether you’re in a physical store or business, paying through an app, or buying online.

Known for its “tap-to-pay” technology, contactless payment lets you pay for virtually anything by waving your credit card near a contactless-enabled, in-store checkout terminal, as long as your card has the radio wave icon shown below. Of course, the store has to accept contactless payments, and not every credit card is equipped with tap-to-pay. Contactless credit and debit cards employ EMV chips (like those in traditional chip cards), plus a contactless chip and Radio-Frequency Identification (RFID) antenna.

Such smart credit cards are just one form of contactless payment. Smartphone-enabled digital wallets (aka mobile wallets), smartwatches, and other wearable devices are also embedded with tap technology. With digital wallets, the smartphone has a chip that connects and encrypts credit card information, and a Near Field Communication (NFC) chip that relays data to complete the purchase. When setting up or updating your digital wallet and devices, you can link your debit and credit cards to the digital wallet app on your phone and designate which card to use as the default for contactless payments.

Contactless credit cards and enabled devices like smartphones need to be placed within several inches of the retailer’s card reader to exchange encrypted data. Once activated, voila! The payment is usually completed in a few seconds.

You might be thinking, sure, contactless payment sounds easy and convenient, but are there security concerns to consider? Actually, experts believe that the pros far outweigh the cons. What’s more, contactless payment cards and digital wallets offer differing benefits.

Contactless payment through your digital wallet is considered about as secure as you can get because your card information is never given to a retailer. Instead, when you make a transaction with your digital wallet, your phone uses a virtual number known as a “token.” Once the retailer greenlights that token, which, by the way, is used only for that one purchase, your encrypted payment information is approved.

EMV chip-enabled cards, both contactless and traditional, also use per-transaction, advanced encryption, however, they include a credit card number that could be hacked. With digital wallets, you’re less likely to forget your credit card at the store since you don’t need to take it out, and you might even be able to leave your credit cards at home. Should you lose your real wallet, it can be faster to pause your cards through your digital wallet.

On the flip side, while many national chains accept contactless payment through digital wallets, some merchants lack the technology, so you may need to bring your real wallet along after all. Other considerations: If you forgot to charge your phone or your phone incurs damage, you may be out of luck using your digital wallet.² And in some cases, you can only use your digital wallet in the U.S. if your linked debit card was also issued in the U.S.

While fraud is unlikely in the realm of contactless payments, it’s still smart to take precautions. For instance, since your phone could be lost or stolen, it’s wise to use security measures like touch ID, facial recognition, and PIN numbers to approve transactions and to keep your phone and apps locked. Likewise, it’s a good idea to create notifications for your cards so you’re alerted in case of potential fraud or theft. Also, consider using credit cards instead of debit cards, because if your checking account is exploited, it’s easier to restore a line of credit or contact your credit card provider to stop payment on a transaction than it is to restore cash to your checking account. And don’t overlook anti-malware on your phone.