If you’ve recently received a credit or debit card from your bank, you’re likely to have noticed a new symbol or logo on it. But you probably didn’t notice the internal wiring that lies behind it. We take a look at the technology involved and what you need to know about using these cards.

Most new Visa and MasterCard credit and debit cards issued by our banks now have “contactless” technology built into them. No need to swipe or insert your card … just tap or wave and off you go! The card never leaves your hand.

If your card does have it, it can’t be turned off. ASB is the exception. It allows customers to turn it off through its Card Control feature. Visa’s system is called payWave and MasterCard’s is PayPass. (EFTPOS cards don’t have contactless technology because they’re not Visa or MasterCard products.)

How it works

A tiny antenna and the chip in the card work together with the retailer’s card terminal to send signals back and forth using radio frequency identification (RFID) when you get the card close to the card terminal. But not all retailers have contactless terminals – which is why the cards still have the magnetic stripe and chip for “old-style” payments and for use at ATMs.

Wave or tap your card on the terminal instead of swiping or inserting it.
Wave or tap your card on the terminal instead of swiping or inserting it.

There’s a limit of $80 for each contactless transaction without a PIN – this is set by Visa and MasterCard and can’t be changed. Over that amount you’ll be prompted to put in your PIN (or sign) as usual.

You don’t have to make a contactless payment. You can still insert your card instead of tapping or waving.

Visa and MasterCard also offer Zero Liability protection. That means you’re not liable for transactions if your card is lost or stolen – as long as you report it as soon as possible, have protected your PIN and haven’t contributed to the loss (as defined by your bank’s terms and conditions).

Other countries usually have a limit of 4 or 5 contactless transactions before a PIN is asked for. Visa told us the same applied here. It’s a sensible security feature. If you lose your card or it's stolen, someone can only make a finite number of contactless transactions (each up to $80 in value) … until you report your lost card or the transaction limit kicks in.

What are the benefits?

Speed, convenience and control are the benefits touted by the banks and credit-card companies. They want you to use your credit or debit card instead of cash or EFTPOS for low-value purchases.

There are more than 10,000 contactless terminals in New Zealand – and they’re at major chains such as BP, Countdown, Farmers, Kmart, The Warehouse and Z Energy.

Poor communication

So far the banks haven’t done a great job of informing customers about the technology and how it works. We’ve had a couple of members tell us of their surprise when their card made a contactless payment at the checkout just as they were trying to swipe the card. They weren’t even aware their card had this new feature!

Some banks are sending brochures and information sheets. But others just mail the card, mention the contactless feature in the accompanying letter and refer you to their website – that’s not good enough.

We think customers need to be aware their card is contactless, so they can understand how and when to use it. Retailers also need to train their staff carefully, so that they process transactions properly.

Making a payment

 Look for the contactless logo – 4 curved lines – or the Visa payWave and MasterCard PayPass logos.
Look for the contactless logo – 4 curved lines – or the Visa payWave and MasterCard PayPass logos.

The retailer enters the transaction amount. Then you’re prompted to wave or tap your card on the terminal instead of swiping or inserting it. The card needs to be within 4 centimetres of the correct area on the terminal to be read for more than half a second. When the terminal shows the transaction is complete, you put away your card. If you want a receipt, you ask for one.

Not all terminals are the same. Some might have a separate reader. Most are similar to existing terminals but have an area where you tap your contactless card. Look for the contactless logo – 4 curved lines – or the Visa payWave and MasterCard PayPass logos.

Are the cards secure?

You can’t be charged more than once. Each individual transaction needs to be authorised by the retailer. You’ll hear a beep and see 4 green lights appear to indicate the transaction is complete.

And you can’t be accidentally charged for a transaction by just walking past a terminal. The terminals have too short a range.

Likewise, it’s not likely your contactless card could be scanned by someone casually passing a reader close to your purse or wallet. Contactless cards are securely encrypted and both Visa and MasterCard have said these cards are as secure as traditional cards – if not more so, because they include extra security-protection.

What’s more, you’re in control of your contactless card: you don’t need to hand it over to a retailer, so it can’t be illicitly copied.

There are wallets and covers for your contactless card that block them from being read. They’re made of aluminium or have a metal mesh woven into them. If you’re crafty make your own out of tinfoil! When you have more than one contactless card – such as a credit card and a transport card – these covers can also prevent them from interfering with one another.

As always, you’re your card’s best security feature:

  • Protect your card like you protect cash.
  • Be aware of where your card is.
  • Check your statement regularly – you can do this online.
  • Make sure you get a PIN for your card and never reveal it to anyone!
  • Keep a record of your card numbers, expiration dates and emergency phone numbers in a safe, separate place.

Debt

The convenience and speed of using a contactless credit card instead of cash or EFTPOS needs to be balanced with sensible credit use.

Tip: If you don’t pay off your credit card in full each month, don’t use your contactless credit card to pay for $4 coffees. You’ll be paying interest on them and that’s “dumb debt”. Stick to cash or EFTPOS or use a contactless debit card for the small stuff.

Report by Kate Sluka.