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I have a 2013 workflow that Updates Item in the current List. I have read somewhere that depending on what my workflow does, that I may need to use an App Step. It talked about needing to use App Step for Update Item logic and the reason why I'm asking. 90% of users have Contribute permissions. If I don’t use an App Step for Update Item logic, will the workflow pose problems for users with Contribute permissions?

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Workflows operate under the context of the initiator. You would only need to use an AppStep (which is the new impersonation model from 2010) if the user that initiated the workflow process doesn't have the ability to do what the particular actions are going to do.

So in your example, no, you wouldn't need to use an AppStep to update a list item because Contribute covers this. You would need to use it thought if somehow a user with Read permission would initiate the workflow. The update would fail if not in an AppStep because the user does not have permission to modify list items.

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