5 On Your Side

New Wave in Credit Cards Comes With Risks

Posted March 12, 2008 6:32 p.m. EDT
Updated March 12, 2008 10:37 p.m. EDT

— Cash used to be the fastest way to pay, but technology could change that. A new kind of credit card gets you in and out of a store with just a wave in front of a special reader.

Visa's payWave technology is offered by 41 card-issuing banks around the world and accepted at more than 32,000 retailers.

The cards use microchips and radio waves to transmit encrypted information with a technology called RFID. You don't have sign for most purchases under $25, which makes checkouts speedier, though some merchants have already implemented that for conventional charge purchases.

It is convenient, but Consumer Reports said there could be a downside to waving all that sensitive information through the air.

"The card issuers deny it, but some people think this technology exposes you to greater security risks, such as identity theft. There's concern about a tactic called skimming, where a thief could use a portable card reader to literally skim your encrypted information out of the air,” Greg Daugherty, with Consumer Reports said.

Visa insists the data on your card can only be processed by secure readers at authorized merchants. The credit card company covers payWave cards under its zero-liability policy, which means you are not responsible if a thief uses your card.

But Daugherty is not sold on payWave's safety guard.

”You may not get a receipt on transactions under $25 unless you ask for one, which could be a problem if you need to return something,” Daugherty said.

A study last year by Smart Card Alliance found people spend an average of 20 to 30 percent more when using touch-less technology.

If you decide to apply for a touch-less pay card, Consumer Reports said to make sure the card-issuing bank doesn't charge extra fees. When you use it, remember to get a receipt and watch your account for fraud.