Contactless Payments: What They Are and How They Work

Contactless payments make daily transactions easier by allowing you to hover your card or device over the payment terminal.

Rebecca Goodman Published on 08 December 2020. Last updated on 05 March 2021.
Contactless Payments: What They Are and How They Work

Contactless payments can be made by tapping or waving a device, usually a bank card or smartphone, over a payment terminal. It’s been possible to pay this way since 2007, and in 2017 cards became the most common way of paying for things, overtaking cash for the first time, according to UK Finance.

It’s a lot quicker to pay this way, and many businesses are only accepting contactless payments during the coronavirus outbreak.

Here we look at everything you need to know about contactless payments.

What is a contactless payment?

Instead of paying with cash or using a card and entering a personal identification number, or PIN, contactless payments use a different sort of technology.

Within all contactless cards there is a radio-frequency identification (RFID) or near field communication (NFC) chip. When the card is held over a payment terminal, it picks up a signal from the chip and processes the payment.

It’s not just cards either. Most smartphones are enabled with contactless technology, and there are a good many wearable devices that can be used for contactless payments, including key fobs, wristbands and watches.

Where can I make contactless payments?

Lots of businesses now allow contactless payments. In some cities, such as London, you can use contactless payments for public transport.

There usually will be a sign by the till that tells whether contactless payment is an option. Generally, you will be able to use it in most places where you are also able to use a card and PIN machine.

What are the advantages and disadvantages of contactless payment?

Although contactless payment is becoming common, it’s good to be aware of the pros and cons.


The main benefit of contactless payments is the speed they take to process. They also mean you don’t need to enter your PIN anymore.

There are lots of extra security measures with contactless payments, including a limit of £100 per transaction and a limit on the number of transactions you can make before you’re asked to enter your PIN.

And if you’re using a device like your smartphone to pay, you could leave your wallet and cards at home.


There are risks with contactless cards and devices. If your card is stolen, for example, someone else might start using it to buy things without needing to know your PIN.

If this happens, you’ll need to report the card stolen as soon as you find out. The sooner you do this, the better the chance of getting all your money back.

How long do contactless payments take to process?

This depends on your bank and the retailer, but contactless payments are usually instant. When you hold your card or device over the terminal, there should be a green light or a beep to signal the payment has been successful.

A receipt may not be automatically issued, but you can tell a member of staff you’d like one.

What happens if a contactless payment is declined?

If your contactless payment is declined, you should know this instantly as well. It may be that you need to put your card in the machine and enter your PIN as part of a security check from your bank.

It’s also not possible for contactless card readers to make more than one transaction at a time, because each transaction needs to be completed or voided before another can take place. The current limit is five transactions in a row. After that, you’ll need to input your card into the machine and enter your pin.

Is there a limit on contactless payments?

Yes. After the 2021 Budget, the contactless limit rose to £100 for individual transactions. This increases the £45 limit that was introduced in April 2020. in response to the number of businesses asking customers to make contactless payments in order to limit the spread of coronavirus. If you spend above the limit, you’ll have to input your PIN.

It may take time before the higher limit is available in shops.

The contactless limit for multiple transactions is £300, an increase from £130, so if you reach this level you may be asked to enter your PIN.

Do I have to take the card out of my wallet to make a contactless payment?

If you’re tapping your wallet or cardholder on a terminal, the payment should come off just one card — but it might not happen from the card you think. Therefore it’s worth taking out the card you want to pay with and tap it on the terminal.

How can I get a contactless card?

Most banks and building societies automatically issue contactless cards now. If you don’t have one yet, you will need to contact them to ask for one. This can be in person, on the phone, or via online banking. The bank should be able to post one out to you.

There should be no fees for paying with contactless or for requesting a contactless card.

About the author:

Rebecca Goodman is a freelance journalist who has spent the past 10 years working across personal finance publications. Regularly writing for The Guardian, The Sun, The Telegraph, and The Independent. Read more

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