Abstract Quarantining close contacts of individuals infected with SARS-CoV-2 for 10 to 14 days is a key strategy in reducing transmission. However, quarantine requirements are often unpopular, with low adherence, especially when a large fraction of the population has been vaccinated. Daily contact testing (DCT), in which contacts are required to isolate only if they test positive, is an alternative to quarantine for mitigating the risk of transmission from traced contacts. In this study, we developed an integrated model of COVID-19 transmission dynamics and compared the strategies of quarantine and DCT with regard to reduction in transmission and social/economic costs (days of quarantine/self-isolation). Specifically, we compared 10-day quarantine to 7 days of self-testing using rapid lateral flow antigen tests, starting 3 days after exposure to a case. We modelled both incomplete adherence to quarantine and incomplete adherence to DCT. We found that DCT reduces transmission from contacts with similar effectiveness, at much lower social/economic costs, especially for highly vaccinated populations. The findings were robust across a spectrum of scenarios with varying assumptions on the speed of contact tracing, sensitivity of lateral flow antigen tests, adherence to quarantine and uptake of testing. Daily tests would also allow rapid initiation of a new round of tracing from infected contacts.