Do you need to line your wallet with tin foil?

By , CardRatings Contributor
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Using credit cards keeps getting easier and easier. First, you only had to swipe and sign. Then, you could simply swipe and be on your way for small purchases. Now, some credit cards are taking swiping right out of the equation.

Contactless credit cards use radio frequency identification - known as RFID - to submit payment information from a card to a merchant. You swipe or tap your card on a reader and the data automatically transfers. Smart phones are getting into the act too by using near-field communication to facilitate payments from mobile wallets stored on the device.

However, all this convenience may come at a cost. Some experts warn contactless technology may allow thieves armed with scanners to pull your account information out of your pocket without ever touching your card.

Are you at risk for digital pick-pocketing?

Privacy concerns have been cited almost as long as RFID technology has existed. But now that some 100 million credit cards sporting the radio frequency chips are said to be in circulation, the issue is coming front and center.

If you tend to be the paranoid type, you probably don't want to hear that at the Defcon hacker conference last summer, a speaker demonstrated just how easy it is to pull data from a card. In a matter of minutes, he skimmed a card (his own) and then turned around and made a payment immediately using a android app. Even more disturbing, this app and other tools are apparently readily available to anyone with a little tech savvy and devious intentions.

Before you cut up your cards and swear off mobile wallets, the Smart Card Alliance says it hasn't seen any actual cases of thieves making off with credit card data this way. The alliance, an industry group that advocates for contactless payments, says they are secure. In addition, the group notes a card needs to be within 2-4 inches of a scanner to be read. Unless you are bumping up against someone on a busy subway, it may be hard for a thief to get that close.

Protecting your credit cards from skimming

Now, I must admit I am not too horribly concerned about someone skimming my card data. It's not that I am a glutton for punishment; I am a realist. Here in Midwest suburbia -- where I live -- there are few opportunities for people to invade my space bubble and get close enough to my wallet, which incidentally is buried in an oversized purse, to make the RFID transfer.

Still, you may not want to take any chances in having your credit card data vulnerable. You can buy special wallets intended to block RFID signals, but the most low-cost option may be to simply line your current wallet with some aluminum foil. Feel free to insert your favorite tin foil hat joke here.

Whether you take the laissez-faire approach or end up being a little more proactive, remember that all credit cards come with fabulous fraud protection benefits. In the event your card number is stolen, while seriously inconvenient, the Federal Trade Commision enforces a limit to your liability of the first $50 of any fraudulent charges. According to the FTC website, "If your credit card number is stolen, but not the card, you are not liable for unauthorized use."

So go ahead and use your gas card, cash back card and other favorite card without fear. Simply be sure you are watching your statements and alert your issuer as soon as possible if you notice any unauthorized charges.

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