How does Apple Pay work?

If you are like me you watch with interest whenever Apple introduces something new. That is not because I want to buy every new thing, but lately it seems like their new products and ideas change how things are done everywhere.

So, I have been curious about Apple Pay. I keep reading articles and seeing things on it, but none of them tell me how it really works. I want a down to earth, Not A Geek, explanation. 

Here is what I have found out and want to share with you in the way I understand it best.

HOW PEOPLE USE IT

1. There are a lot of details, but basically, if you have the right equipment and are in the right store you can just take out your phone at the cash register and instead of swiping your card and entering your pin you can hold your iPhone up to the machine and put your finger on the finger print reader on your phone.
2. The machine will register the purchase and charge your credit card just like it did when you swiped the card through the machine. 

WHAT YOU NEED TO DO IT

If you have a new iPhone 6 or 6 Plus, first you have to download OS version 8.1. If you have a phone older than 6 you cannot do Apple Pay. It will also work with the Apple Watch when it comes out in 2015.

You have to set up your credit card information in your Passbook application on your phone. If you want to use the credit card that is already associated with your iTunes account you can do that by just setting up a 4 digit pin. You can take a picture of the card and the phone will fill in the information!

It only uses cards like Visa, MasterCard, American Express, and Discover. You cannot use your Macy's card. The information about payments made using Apple Pay can be found in the Passbook App.

The cash register that you pay at must be Apple Pay Enabled. You can look for that sign before you begin standing in line planning to pay that way.

It might be good to have a back up way to pay ready. Even though you hope to pay with your phone it is a pretty new technology and so the store may not be set up. 

MORE GEEKY EXPLANATIONS

Near Field Communication Symbol

A bit more "geeky" way to explain it is that Apple Pay uses NFC or Near Field

Contactless Payment Symbol

Communication to connect to the Apple Pay enabled device at the store. Look for the contact-less payment symbol. You may have seen these before because Google Wallet and some credit cards work this way already.

It will also work with the Apple Watch which is due out in January 2015

It is surprising that Apple will not make a bunch of money from this. The company will take a small cut from each transaction. Their goal is to sell phones and watches.

SHOULD YOU USE IT?

So, why use it?  Right now it is mainly a novelty. It might save a little time over swiping a card. Maybe you can carry a lighter wallet. We will only see in the future what it can really do.

BENEFITS OF USING IT

Security - Your credit card number is only entered once during setup. After that your phone sends a different number that is tied to your device when it makes a transaction. The cashier will NEVER see your credit card number and it is not stored anywhere but on your phone. If you lose your phone you can use the app "find my iPhone" to put your phone in LOST MODE so that no one else can get your info. Unlike when you lose your cards you will not have to cancel your credit card and get a new one because your card number was never stored.

Privacy - Apple does not transmit any information about you to the store. In this time when all of our information seems so public Apple Pay is actually anonymous. Some retailers are not happy about that because it does not help them to collect information about you. You will need to provide them with a loyalty card separately, rather than having that information transferred automatically.