Credit card fraud is a huge problem worldwide. Online merchants alone suffer losses of more than US$60 billion each year, according to research firm Financial Insights.
Unfortunately, credit card companies have no incentive to reduce credit card fraud. If someone uses a credit card fraudulently, the merchant that accepts the card—not the credit card company—pays for the loss. Consumers are mostly off the hook, too, with their losses (at least in the USA) limited to US$50 per card in the event of theft or fraudulent charges.
Now, credit card companies have introduced a new type of "contactless" credit card that eliminates the need to swipe the card to make a purchase. The cards contain a radio frequency identification (RFID) chip that transmits authorization data by radio waves.
Incredibly, the credit card companies that have sent out tens of millions of these contactless cards in the last few months didn't bother to include any security features in the new system, such as encryption. Anyone equipped with a RFID card reader, costing less than US$150, can pull up your name, card number and expiration date if they get close enough to your card. Simply aiming the card reader at your wallet or purse, where you keep your credit cards, is enough. It's a little like wearing a T-shirt with your name, credit card number and expiration date displayed on it. Moreover, it's even possible to retrieve the personal information from a new credit card while it's still sealed in its original envelope.
Naturally, the credit card companies deny there's any problem, so it's up to you to protect yourself. I recommend that you cancel any credit card accounts in which the issuer refuses to provide you with a non-RFID equipped card. That precaution just might save your identity from being stolen.
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