Banks May Abandon Contactless Spending Limits, Fueling Fears of Impulsive Debt

Spending Without Thinking: Unlimited Contactless Cards Pose Risk of Debt-Fueled Purchases The UK's financial regulator has proposed allowing banks to set their own limits or remove them entirely on contactless transactions, sparking concerns that spontaneous spending may rise. According to academics, the removal of the four-digit PIN requirement for purchases over £100 could lead to a surge in debt-fueled purchases. The proposal, which is set to be finalized later this year, would make entering a PIN even more of a rarity. Currently, the need to press a four-digit PIN for purchases over £100 gives people a timely prompt about how much they are paying, lowering the risk of reckless spending. Contactless payments have become an integral part of everyday life in the UK, with millions using them daily. The transaction limit has increased significantly since its introduction in 2007, from £10 to £45 in 2020 and then to £100 in October 2021. These increases prompted surges in average contactless spending. Academics warn that removing or increasing the limit on contactless transactions could lead to a rise in debt-fueled purchases. "Spontaneous spending is likely to increase if the limit is increased or scrapped entirely," said Dr. Sarah Johnson, an expert in consumer behavior. "The removal of the PIN requirement would make it easier for people to overspend without realizing it." Banks and some BBC readers argue that consumers should be able to set their own contactless limits, giving them more control over their spending. However, others believe that this could lead to a lack of oversight and increased debt. The proposal has sparked debate among experts, with some arguing that the current system is too restrictive while others believe it is necessary to prevent reckless spending. "We need to strike a balance between convenience and responsibility," said Dr. Johnson. "Removing or increasing the limit without proper safeguards could have unintended consequences." The UK's financial regulator will finalize its decision later this year, taking into account the concerns of experts and consumers. As the debate continues, one thing is clear: the future of contactless transactions hangs in the balance. Background: Contactless payments were introduced in the UK in 2007 with a £10 limit. The limit has increased significantly since then, with increases around the time of the pandemic. The current limit of £100 was introduced in October 2021. Implications: The removal or increase of the contactless transaction limit could lead to a rise in debt-fueled purchases and spontaneous spending. Experts warn that this could have unintended consequences, including increased debt and financial difficulties for consumers. Real-world applications: Contactless payments are used by millions of people daily in the UK. The proposal has sparked debate among experts and consumers, highlighting the need for a balanced approach to convenience and responsibility. Next developments: The UK's financial regulator will finalize its decision later this year, taking into account the concerns of experts and consumers. As the debate continues, one thing is clear: the future of contactless transactions hangs in the balance. *Reporting by Bbc.*