Smart SpendingSmart Spending

Swipe your card, spend less money?

A new MasterCard study shows that shoppers spend more when they use 'contactless' -- or swipe-free -- credit cards.

By MSN Money Partner May 9, 2012 1:39PM

This post comes from Brian O'Connell at partner siteMainStreet.


Does the simple act of handing your credit card over to a cashier, or at least swiping the card in a scanning device at the register save you money?


Image: woman swiping a credit card © Rubberball/Mike Kemp/Rubberball/Getty ImagesIn a strange way, yes it does -- at least in a relative sense.


A new study from MasterCard Advisors says that credit card consumers who use "contactless" card transactions (where the consumer waves the card, or more recently, even a smartphone, over a payment terminal) tend to spend more money using their credit card than do card "swipers."


From a technology sense, contactless cards save consumers time by avoiding the task of running the card through a magnetic stripe reader.


Swipe-free cards are embedded with a special microchip and radio signal that links the card and the payment terminal to quickly and accurately record the purchase. The payment device, in turn, contacts the bank that issued the credit card to OK the transaction. A receipt is generated, and the consumer walks off with his or her purchase -- all within a matter of seconds.


Contactless cards are becoming more ubiquitous, with MasterCard (PayPass); Visa (payWave) and American Express (expresspay) all hitting the market recently, and consumers are apparently getting the hang of using swipe-free credit cards. (Post continues below.)

Expect those companies to ramp up their contactless card campaigns if MasterCard's data holds up.


According to MasterCard, consumer spending rises 30% among contactless card users when compared with consumers who swipe their cards at the register. The data doesn't tie any obvious differences between the cards to the disparity. After all, waving a card only saves a few seconds compared to swiping.


But the novelty alone may account for the spending increase, as MasterCard says that 30% figure comes in the first 12 months of owning a contactless card.


Another possible reason: MasterCard indicates contactless credit cards are the "top of the wallet choice" among consumers, presumably for their ease of use and faster payment completion capabilities.


"The research also found a clear correlation between contactless adoption and preference for a particular card, illustrating that a contactless payments solution may help drive top-of-wallet behavior," the MasterCard study finds.


The study also notes use of a contactless card means more spending among "low, medium and high spend segments." So it's not just the affluent that are spending significantly more money using swipe-free cards. Growth among all three categories was "consistent," the study reports, although high earners may use their cards slightly more.

"In our highest spend segment, this lift translates into approximately $600 per month in incremental (spending)," says Jonathan Orndorff, the chief researcher on the study. "Increases like this can have a significant impact on the issuer business case for contactless."


Indeed, for card companies looking for additional profit centers in a stricter government regulation environment, a potential 30% spending uptick among customers will likely lead to one conclusion: "Wave" beats "swipe" any day of the week.


More on MainStreet and MSN Money:



Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.