Despite their popularity, not everyone is up to speed with contactless cards and how they work. 

Suppose you’ve previously relied on more traditional payment methods but are keen to embrace contact-free transactions. In that case, our simple guide has everything you need to know.

What is a contactless card?

A contactless card is simply a debit or credit card from your banking provider that can pay for transactions without contacting a card reader. They were introduced to the UK in 2007 as an alternative to traditional chip-and-pin credit and debit cards. Still, it took a few years for the technology to gain momentum with the public. By 2014, contactless cards began to overtake other payment methods.

This has partly been attributed to Transport for London, allowing passengers to use contactless cards alongside traditional tickets and Oyster cards in the UK. Contactless cards can be used for buses, the tube, trains, trams, DLR journeys and more. London led the way, and the rest of the UK followed. By the end of 2014, contactless spending in the UK totalled £2.32 billion – a staggering increase of 255% from the previous year.

Contactless payments account for 88.6% of total card payments in the UK 2020. 

How do contactless cards work?

Contactless cards look the same as traditional chip-and-pin credit cards and debit cards from your bank. If you have a credit card or a debit card already, you probably know how they work. If you need a refresher, try our helpful how to use your credit card guide. 

The only difference with a contactless card is how you pay for goods and services at the end of the transaction. Instead of putting your card into the reader, you simply hover it over the device and let the technology do the rest. But how do contactless cards work? 

Contactless cards use wireless Near-Field Communication (NFC) technology to communicate with other devices – like card readers – without coming into contact. A small chip inside the card uses radio waves to communicate with the card reader. This is known as radio frequency identification (RFID) technology. 

  1. Your contactless card has a copper wire antenna that can pick up the card reader’s signal when you’re in range 

  2. When you move your contactless card close to the reader, it enters the terminal’s electromagnetic field

  3. This field activates when the retailer begins the transaction process, so it can’t happen accidentally

  4. The chip in your card shares your account information with the reader using an encrypted language

  5. The reader introduces itself to the card, and the payment is sent

  6. The terminal will then confirm the payment has been accepted in an instant, and you’re on your way  

The technology is not limited to credit cards, debit cards, and card readers either. NFC technology is also used in smart devices like mobile phones and watches. It connects your devices with your bank account and lets you use them for transactions in a similar way.

Reasons to use a contactless card

There are many benefits to using contactless cards for your transactions

  • Contactless transactions are fast and convenient

  • Paying with contactless is straightforward

  • Contactless payments are clean and safe

  • Additional uses (like public transport payments)

  • Extra security measures like encryption and coded data  

Additionally, faster transactions mean less queuing, which is excellent news for consumers and retailers and can improve the general customer experience.  

How to use contactless cards

Contactless cards have been designed for ease of use and simplicity. Their aim is to make transactions faster, safer, and more straightforward; unlike other methods, you don’t need to remember a PIN or passcode.

  1. When it’s time to pay, look for the contactless symbol on the retailer’s payment terminal or ask if they take contactless payments

  2. Hold your card within a few centimetres of the card reader when prompted

  3. You will hear an almost instantaneous beep to confirm your payment has been accepted

How to use a contactless card for the first time

Depending on your bank or credit card provider, you’ll usually need to activate your card over the phone after receiving it in the post. The first time you use your contactless card, you will need to enter your PIN number to activate the card. 

After this first transaction, you’ll be able to use contactless going forward.

Where can I use contactless cards?

You can use contactless cards in many places around the UK, including shops, cafés, bars, restaurants, supermarkets, petrol stations, vending machines, and more. It’s rare to find a shop, even a small business, that doesn’t accept contactless payments. 

Several transport providers have also followed Transport for London’s example by allowing contactless payments on their buses, trams, and coaches. 

There was once a reasonably small spending limit on contactless cards; the limit has now increased, allowing you to use your card for the vast majority of transactions.

Can I withdraw cash with a contactless card? 

Contactless cash machines are on the rise, and we will likely see them spread across the UK in the future. However, at present, the majority are still traditional chip-and-pin. So while you can withdraw cash with your contactless card, you may still have to use your PIN in many cases. Different banks are moving at different speeds when it comes to rolling out new technology, so it’s worth contacting your provider to find out more. 

Will my contactless card work abroad?

Yes, your contactless card will work overseas, anywhere you find the contactless symbol displayed. Most countries have now adopted contactless payments since the technology was first introduced. 

When using contactless cards overseas, it pays to be aware of spending limits and bank fees. It’s always best to check with your bank or card provider before travelling to be sure.

Contactless card limit

When contactless cards were first introduced, there was a £10 spending limit per transaction. During the initial trial period, contactless card payments were preferred for small transactions, like paying for a coffee or loaf of bread. The limit was introduced as a safeguard against misuse if a contactless card was misplaced, lost, or stolen.

This spending limit has gradually increased thanks to the popularity of contactless payments and demand from consumers. Now, many use their contactless cards for more significant purchases like food shopping or petrol. In March 2021, the Financial Conduct Authority (FCA) confirmed it would allow for an increase in the single transaction contactless payment threshold from £45 to £100 and from £130 to £300 for multiple transactions within 24 hours. 

Are contactless cards safe?

One of the main concerns people have about contactless cards is security. Specifically, are they safe? Unlike chip-and-pin debit or credit cards, you do not need to enter a pin, so what’s to stop someone from stealing and using your card instead of you? 

This is one reason for limits on contactless cards, but contactless card fraud rates are low. There are other safeguards in place, too, like retailers being prompted to ask for your pin if you’ve used your card a higher number of times in a set period.  

It’s also worth noting that fraudulent transactions made using contactless cards carry the same protection as any other card. In other words, if your contactless card is stolen and used to make a payment, your bank should reimburse you.

Can you make accidental payments with your contactless card?

This is another concern that people have about contactless cards. While it is possible, contactless card readers are designed to take payment only when a card is presented, which means it’s held close to the device. Card readers will also reject charges if two cards are within range at the same time. 

A retailer also needs to activate the terminal to take payment, so it’s doubtful you’ll pay for someone else’s shopping as you walk by. Thanks to these factors, accidental payments are relatively rare occurrences. 

What happens if I lose my contactless card?

If your card is lost or stolen, it’s essential to report it to your provider as soon as you notice it’s missing. The process is effectively the same as with any debit card or credit card. 

You might be more anxious with a contactless card because there’s a chance a thief might use it to make a payment without needing your PIN. But spending limits mean no vast amounts can be stolen. Additionally, any fraudulent spending is covered by Payment Services Regulations for debit cards and the Consumer Credit Act for credit cards.

What is the difference between contactless cards and using your mobile phone or smart device to pay? 

Mobile devices such as smartphones and smartwatches can also make contactless payments. This can be through a banking app or via a digital wallet such as Apple Pay, Samsung Pay, or Google Pay. These work similarly to contactless cards and use the same technology; the big difference is holding your device near the card reader rather than your credit or debit card. You also often use your fingerprint to authorise the payment. This adds an extra layer of security, although phones and smartwatches can run out of battery.

How do I accept contactless card payments?

You might be wondering how to accept contactless card payments as a retailer or small business owner. It’s straightforward. All you need is a payment terminal and card reader that can accept contactless payments.

Your current terminal might already do this. To check, simply look for a contactless symbol on your card reader. It’s the same as the symbol that appears on contactless cards – four curved lines like a sound wave. 

If your reader does not have the logo or you’re unsure, check with your point of sale (POS) provider as you may be due an upgrade to a more up-to-date terminal. It’s getting more and more unusual for this to be the case as almost all UK retailers are now equipped with contactless card readers as standard.  

Do I have to use contactless?

Almost all contactless card readers will also accept chip-and-pin. One of the reasons for this is that even when you have a contactless card, you will sporadically be asked to enter your PIN as a security measure. While more and more retailers advise customers to use contactless where possible, you can still choose to use chip-and-pin if you want to. 

How to choose a contactless card

Contactless cards all use the same technology, so when you’re choosing a debit card, it’s really about who you want to bank with. When it comes to your credit cards, it’s about comparing rates and incentives to find the right product and provider for your needs. See our credit card guide for more on this.

Contactless cards have transformed how we pay for goods and services. Their widespread popularity shows no sign of slowing down. Thanks to contactless cards, the UK is now the third most cashless country globally, behind Canada and Sweden. 

Fast, convenient, hygienic, and safe, contactless cards have many benefits. Still, they might seem futuristic and intimidating if you’re used to more traditional payments. It’s up to you to decide whether to make the switch to contact-free transactions in the future.

6 May 2021