The Reserve Bank of India (RBI) in its latest Monetary Policy Committee meeting has proposed to increase the limit for a contactless card transaction from ₹2,000 to ₹5,000 from January 1, 2021. However, before opting for a contactless card and using it, you should know its pros and cons.
In a bid to give a push to digital payments, the Reserve Bank of India (RBI) in its latest Monetary Policy Committee meeting proposed to increase the limit for contactless card transactions. With effect from 1 January 2021, the limit for contactless card transactions will be increased to ₹5,000 from the earlier ₹2,000. The central bank decided to increase the limit for contactless card transactions at Point of Sale (PoS) terminals in view of the novel coronavirus pandemic and feedback from stakeholders.
“Accordingly, given the sufficient protection available to users, it has been decided to increase the per transaction limit to ₹5,000,” said one of the circulars, adding that all other requirements, including the discretion of cardholder to use contactless or contact mode of transaction, would continue to remain applicable.
Contactless card transaction: Pros
As the transactions on contactless cards are processed without any security code, the process is convenient and you don’t have to remember the PIN.
Contactless card transaction: Cons
But for the same reason that the transactions on contactless cards are done without any security code, there are also the risks of unauthorised transactions.
The central bank has made it mandatory for all transactions above ₹2,000 to be authenticated twice. The extra security layer is used to curb frauds and make electronic transactions more safe and secure.
Besides cards, there are different options for contactless payments: the UPI (Unified Payment Interface), payment wallets and IMPS (Immediate Payment Service). Each of these modes of payment has its merits and demerits.
The RBI allowing a higher contactless transaction limit of ₹5,000 against ₹2,000 currently will drive digital payments further in the country.
How do contactless cards work?
You might have noticed that your credit and debit cards sometimes get swiped without entering PIN if the transaction amount is below ₹2,000.
This is possible on cards that have a Wi-Fi symbol which is known as contactless cards. It uses near factor communication (NFC) technology, which allows you to tap and pay at the terminal.