Are Contactless Payments Safe?
How secure is a contactless payment? Contactless payment technology has come a long way, but it’s still important to be aware of safety precautions.
February 7, 2022
Contactless payment technology, tapping a credit card or your phone to pay, seems new in America, but it’s a well-established technology from a global perspective.
Recent data from Visa reveals that around 60% of all its transactions abroad are contactless.
In the states, the figure is far lower — but it’s multiplying. Since March 2019, contactless payments have risen 150% in the U.S. Contactless payment increased significantly during the COVID-19 pandemic, as retailers and customers alike sought ways to reduce interactions with high-touch surfaces.
But are contactless cards safe? How secure is a contactless payment?
How do contactless cards work?
The term “contactless” can refer to one of two different payment methods:
Tapping a contactless credit or debit card on a payment terminal
Using your mobile device to tap-to-pay (using Apple Pay, Google Pay, Samsung Pay, etc.)
Both of these payment methods function similarly.
When you tap your card or phone, a new, unique code is created and sent wirelessly to the payment terminal. Each transaction generates a new code, and your account number and name are never sent to the payment terminal.
In this way, contactless payments are more secure than the older swipe credit cards. The terminal never gets your actual credit card number, name or address, so it’s harder to steal identification information in payments.
The unique code is transmitted wirelessly to the payment terminal. Any card with a contactless symbol (which looks like WiFi bars turned sideways) can submit payments wirelessly using contactless-enabled terminals. These cards use radio-frequency identification technology (RFID).
When you pay with a smartphone or smartwatch, a similar process occurs. The app generates a unique code sent wirelessly to the payment terminal. The main difference is that these smart devices use near-field communication (NFC) technology to transmit the data instead of RFID.
Are contactless payments safe?
Overall, yes. Contactless payments are just as safe as a chip payment made at a chip-enabled terminal. They’re more secure than a swipe transaction using a credit or debit card, as it’s harder to skim identifying information from transactions.
Each contactless transaction uses a unique single-use code. So even if a criminal managed to intercept this signal, they wouldn’t get an account number or other sensitive information.
Potential dangers of contactless cards
Overall, contactless payments are safe and secure thanks to card features such as contactless fraud protection. That said, there are two potential issues that you should be aware of:
Theft of physical card
If someone steals your contactless payment card, they can easily use it to make in-person purchases, as no PIN code or signature is required. However, most cards have contactless fraud prevention guarantees.
As long as you report the fraudulent transactions promptly, the credit card issuer should refund the fraudulent purchases. Under the rules of the Fair Credit Billing Act, the maximum (as long as you report the fraud). So even if a thief racks up $3,000 in fraudulent purchases, the most you’re required to pay is $50.
Some contactless cards transmit payment data via RFID.
In theory, certain devices can “skim” this information, stealing credit card information when you walk past the device. However, this isn’t much of a threat, according to multiple industry experts. Many modern cards don’t use RFID, and those that do typically encrypt the signal so thieves can’t use it. RFID skimming is rare.
Ultimately, contactless cards aren’t any riskier than traditional credit cards, and they’re considered more secure than the older swipe cards that don’t have chips.
It’s easier than ever to spend money
Perhaps the biggest danger of contactless payments is the speed and convenience — which is exactly what credit card companies want. With contactless payments, it’s easier to tap for a transaction. In some cases, you don’t even need to pull out a card. By removing the “friction” involved in purchasing, credit card issuers and banks can encourage Americans to spend more, more often.
Credit card companies make money in a few main ways:
Through interchange fees (a percentage of each transaction made)
Through interest charges when users carry a balance
Through credit card fees like annual fees and late fees
In many ways, the more you spend, the more credit card companies profit.
Some view the switch to contactless payments as another way these companies are trying to encourage spending. While contactless is genuinely convenient (and secure), keeping debt in check is important.
Paying off credit card debt with Tally
Credit cards can be a slippery slope. With contactless payment technology, it’s easy to spend beyond your means and end up with debt that can be a huge burden on your financial wellbeing.
If you have existing credit card debt, Tally†’s lower-interest line of credit may be able to help. Tally helps qualifying Americans consolidate their debt into a single line of credit with a lower interest rate for qualifying borrowers. Plus, Tally’s easy to use app technology helps manage and pay off credit card debt efficiently.
Learn more about Tally, and check out the blog to brush up on your personal finance knowledge.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.