Here's How Apple Will Finally Kill Credit Cards With The iPhone 6

Apple announced two new devices today, the iPhone 6 and the iPhone 6 Plus. Both phones have a new payment feature, Apple Pay, that aims to make plastic credit cards obsolete.

"Apple pay will forever change the way all of us buy things ... it's what makes the iPhone 6 the biggest advancement in the history of iPhones," Tim Cook said at Apple's conference.

Here's how Apple Pay works. Touch your phone to a scanner at one of 220,000 physical retail stores like Walgreens, Duane Read, and McDonald's, and TouchID will help you buy the products with a single tap. The demo looks like the process takes about 2 seconds.

Here's how Apple is making that possible. Apple is storing cards securely by encrypting the information and storing multiple credit cards in Passbook. Each card gets a device-only account number, so your actual card number is never stored or shared.

Apple takes the card you have stored on your iTunes account, or it lets you take a photo of another card and easily add it to Passbook.

"Apple Pay uses device-only account numbers. We use a one-time payment number along with a dynamic security code," Apple's Eddy Cue says.

Because your actual credit card number is never stored or shared, you don't have to cancel your credit cards if your iPhone gets stolen. You can also use Find My iPhone to suspend all payments from a device.

220,000 U.S. retailers have partnered with Apple Pay, as well as six major banks. The three major credit card companies, MasterCard, Visa and American Express, are all on board, so 83% of all credit card payment volume can theoretically pe processed by Apple Pay.

For online stores and apps, Apple Pay will be a button that can be added to make check-out possible with one tap.

Apple will begin rolling out Pay within a month, and it will be an iOS 8 update. It will begin in the United States and spread from there.