How can I save my secret keys and password securely in my version control system?

I keep important settings like the hostnames and ports of development and production servers in my version control system. But I know that it's bad practice to keep secrets (like private keys and database passwords) in a VCS repository.

But passwords--like any other setting--seem like they should be versioned. So what is the proper way to keep passwords version controlled?

I imagine it would involve keeping the secrets in their own "secrets settings" file and having that file encrypted and version controlled. But what technologies? And how to do this properly? Is there a better way entirely to go about it?

I ask the question generally, but in my specific instance I would like to store secret keys and passwords for a Django/Python site using git and github.

Also, an ideal solution would do something magical when I push/pull with git--e.g., if the encrypted passwords file changes a script is run which asks for a password and decrypts it into place.

You're exactly right to want to encrypt your sensitive settings file while still maintaining the file in version control. As you mention, the best solution would be one in which Git will transparently encrypt certain sensitive files when you push them so that locally (i.e. on any machine which has your certificate) you can use the settings file, but Git or Dropbox or whoever is storing your files under VC does not have the ability to read the information in plaintext.

Tutorial on Transparent Encryption/Decryption during Push/Pull

This gist https://gist.github.com/873637 shows a tutorial on how to use the Git's smudge/clean filter driver with openssl to transparently encrypt pushed files. You just need to do some initial setup.

Summary of How it Works

You'll basically be creating a .gitencrypt folder containing 3 bash scripts,

clean_filter_openssl 
smudge_filter_openssl 
diff_filter_openssl 

which are used by Git for decryption, encryption, and supporting Git diff. A master passphrase and salt (fixed!) is defined inside these scripts and you MUST ensure that .gitencrypt is never actually pushed. Example clean_filter_openssl script:

#!/bin/bash

SALT_FIXED=<your-salt> # 24 or less hex characters
PASS_FIXED=<your-passphrase>

openssl enc -base64 -aes-256-ecb -S $SALT_FIXED -k $PASS_FIXED

Similar for smudge_filter_open_ssl and diff_filter_oepnssl. See Gist.

Your repo with sensitive information should have a .gitattribute file (unencrypted and included in repo) which references the .gitencrypt directory (which contains everything Git needs to encrypt/decrypt the project transparently) and which is present on your local machine.

.gitattribute contents:

* filter=openssl diff=openssl
[merge]
    renormalize = true

Finally, you will also need to add the following content to your .git/config file

[filter "openssl"]
    smudge = ~/.gitencrypt/smudge_filter_openssl
    clean = ~/.gitencrypt/clean_filter_openssl
[diff "openssl"]
    textconv = ~/.gitencrypt/diff_filter_openssl

Now, when you push the repository containing your sensitive information to a remote repository, the files will be transparently encrypted. When you pull from a local machine which has the .gitencrypt directory (containing your passphrase), the files will be transparently decrypted.

Notes

I should note that this tutorial does not describe a way to only encrypt your sensitive settings file. This will transparently encrypt the entire repository that is pushed to the remote VC host and decrypt the entire repository so it is entirely decrypted locally. To achieve the behavior you want, you could place sensitive files for one or many projects in one sensitive_settings_repo. You could investigate how this transparent encryption technique works with Git submodules http://git-scm.com/book/en/Git-Tools-Submodules if you really need the sensitive files to be in the same repository.

The use of a fixed passphrase could theoretically lead to brute-force vulnerabilities if attackers had access to many encrypted repos/files. IMO, the probability of this is very low. As a note at the bottom of this tutorial mentions, not using a fixed passphrase will result in local versions of a repo on different machines always showing that changes have occurred with 'git status'.

Heroku pushes the use of environment variables for settings and secret keys:

The traditional approach for handling such config vars is to put them under source - in a properties file of some sort. This is an error-prone process, and is especially complicated for open source apps which often have to maintain separate (and private) branches with app-specific configurations.

A better solution is to use environment variables, and keep the keys out of the code. On a traditional host or working locally you can set environment vars in your bashrc. On Heroku, you use config vars.

With Foreman and .env files Heroku provide an enviable toolchain to export, import and synchronise environment variables.

Personally, I believe it's wrong to save secret keys alongside code. It's fundamentally inconsistent with source control, because the keys are for services extrinsic to the the code. The one boon would be that a developer can clone HEAD and run the application without any setup. However, suppose a developer checks out a historic revision of the code. Their copy will include last year's database password, so the application will fail against today's database.

With the Heroku method above, a developer can checkout last year's app, configure it with today's keys, and run it successfully against today's database.