The introduction of contactless payments and Paym has made shopping and paying other people much more convenient. But how exactly do they work? We take a look.
You can use the contactless system to pay a business, like a shop, using your debit or credit card or phone.
You can use Paym to send money to a person using your phone. The money is transferred from your bank account, and you can also use it to receive payments.
You can make a contactless payment using your debit or credit card by holding your card near or on a card reader. It makes paying much quicker because you do not have to enter your PIN.
You can use contactless to pay for transactions of up to £100 that you would usually use your card for, including:
In restaurants or bars
To pay for buses, the tube or trains in London
Most businesses now accept contactless payments. To check, look out for the wave-like symbol at the till or ask if contactless payments are taken. If not, you can pay with your card by entering your PIN as normal.
Contactless cards have a small antenna inside them, which transmits the digital information a card reader needs to process a payment. This is known as radio frequency identification (RFID) technology. Your card will then be debited the same way it would be for any other transaction.
You have to enter your PIN the first time you use contactless, including if you have been issued with a new card.
Contactless transactions could still go through even if you have run out of money. Retailers do not have to check how much money is in your account before accepting your card payment, meaning you could be charged interest if you go into an overdraft.
Note that under new rules introduced in April 2020, banks can no longer charge daily or monthly fees for using an overdraft. Instead, you can only be charged a single overdraft interest rate. The same rate must apply to both arranged and unarranged overdrafts – rates can no longer be higher for unauthorised overdrafts.
The maximum you can pay per transaction with contactless increased in October 2021 from £45 to £100. Some banks and credit card providers also set a daily spending limit, which is also often £100.
If you need to spend more than the limit allows, you can simply pay using your PIN. Some banks and building societies will also give you the option of reducing your contactless limit if you prefer.
There is no extra cost for making a contactless payment. However, other charges may come with the credit card you use or your debit card's current account.
Contactless now comes with most debit and credit cards as standard, but some providers do not offer it yet. To check if your current card has contactless, check if it has a radio wave symbol on it.
Contactless payments come with two main risks:
You accidentally pay with the wrong card by holding your wallet over the device
If someone steals your card, they can easily spend on it
You can avoid paying on the wrong card by taking the one you want to use out of your wallet when you pay, rather than holding your wallet over the device. This also reduces the risk of a card clash where no payment is taken.
Card providers have several ways of stopping fraudulent transactions if your card is stolen, including:
Limits on how much you can spend with contactless
Asking you to enter your PIN for a contactless payment after a certain number of transactions
Freezing your account if your card is stolen and you report it immediately
You can make contactless payments without your credit or debit card by using your smartphone instead. This is available with:
Apple Pay if you have an iPhone or iWatch
Google Pay if your phone or smartwatch uses Google's Android operating system
Garmin Pay if you have a Garmin smartwatch
Fitbit Pay if you have a Fitbit smartwatch
It works using near field communication (NFC), a feature that now comes with most smartphones and some connected watches. You use an app to add the details of a credit or debit card to your phone.
You can then use your phone or watch in the same way as a contactless card. You just need to wake up your phone and hold it next to a card reader when you pay a business.
Although certain retailers will cap them in line with the £100 contactless limit, Apple Pay and Google Pay don’t tend to have spending limits.
With Google Pay, you simply hold your phone over the card reader, but if you want to spend more than the contactless limit, you’ll need to unlock your phone. With Apple Pay, you must use Face ID or Touch ID (scanning your fingerprint) before a payment can be processed.
You can use Paym to:
Receive payments from someone else. The only information they need is your mobile number.
Send payments to another person in the UK who is registered with Paym. You just need their mobile phone number to send money to them.
Paym works by letting you link your bank account to your mobile phone number. This means you do not need to share your bank details with the person sending you money.
You can link your phone number to your bank account by registering for Paym through your mobile banking app.
There are no fees for sending money through Paym. However, your current account may charge you interest if the payment takes you into your overdraft. Your mobile phone provider could charge you for connecting to the internet if you do not have data included in your package.
Log into your mobile banking app
Choose to send a mobile payment
Select who to pay from your phone's contacts, or enter their mobile number
Enter the amount
The money should reach their account within two hours
Several UK banks and building societies offer Paym. You can check if your bank offers it here.
You usually need a smartphone to send payments via Paym because you use it through your bank's app, which you must install on your phone. You don’t need a smartphone to receive payments, but you will still need to register your mobile number.
The maximum amount you can send through Paym each day is usually £250. However, banks can choose to offer you a higher limit.
You can only have one bank account linked to your mobile phone number. However, if you have a joint account with someone else, you can connect both of your phone numbers to it.
The risk of losing money from Paym could come from:
Losing your phone and someone else using it to send a payment
Making a payment and sending it to the wrong person
The good news is if you lose your phone, nobody else can send a payment from it unless they also know your login details for online banking. If you report it as missing to your bank, they may be able to stop unauthorised transactions or even refund them.
You should be able to avoid sending money to the wrong person because you have to verify the recipient's name when you use Paym. If you accidentally sent money to the wrong person, your bank could help you get it back.
Contact your bank to unregister from Paym. Your phone number will then no longer be linked to your bank account.
If you switch your account to a new bank, you can register your new account with your mobile number. First, contact your old bank to unregister your mobile number from the account you held with them. You can then register for Paym with your new bank.