There are so many advertisements out there for identity theft protection. They’d have you believe that that tens of millions of people have been the victims of identity theft and that the problem is growing by leaps and bounds. The commercials are emphatic that you just “can’t afford” to be without protection. And over 50 million American’s have bought into this idea, subscribing to one or more theft protection services at a cost $100-200 a year or more.
So is it really the dire problem it’s made out to be and what should you do to protect yourself?
On the one hand, there is no question that the problem shouldn’t be ignored. On the other hand, a lot of these services are somewhere from questionable to flat out worthless.
Here’s the long and the short of the identity theft situation:
The size of the problem is overstated. Thanks to improved security systems and increased awareness by consumers on both a business and personal level, the number of claims is shrinking. Further, in most cases the theft victim is not liable. According to Consumer Reports:
“The latest available data show that in 2010 identity fraud fell 27 percent, to 8.1 million victims. (“More than 80 percent of what’s been called identity theft involves fraudulent charges on existing accounts, according to the U.S. Department of Justice, but in most cases a cardholder’s liability is limited to $50 for a lost or stolen credit card. For debit cards, liability for an unauthorized transaction is limited to $50 if it’s reported within two business days of the date a cardholder learns of it. After two days, liability can climb to $500 or more, but many banks provide additional voluntary protections.”)
Paid identity theft protection is often far too limited. Many if not most of the commonly advertised protection services don’t provide any better protection than what you can do on your own for free. It’s common for many of these services to have gaps, loopholes, and payments that you’ll never benefit from because they only come after free bank protection fails, which is not what happens in most cases. It’s also common that they don’t actually cover that much, just things like clerical costs, re-application fees and such. You really need to read the fine print very carefully. What you’ll usually find is that the actions you can take for free can provide just as effective protection, and often better.
There’s a lot you can do for free:
- Sign up for online access to your bank and credit accounts and monitor them frequently to stay on top of both errors and fraud.
- Sign up for free alerts from your credit-card issuer and bank that will notify you if a charge of more than say $100 is made to your credit card or if your checking balance falls below a certain amount.
- Obtain a free credit report from each of the big three credit bureaus through AnnualCreditReport.com and check them regularly for suspicious activity. You’re allowed one a year from each service, so request and review one of them every four months for maximum protection.
- If you wish to go a step further, two identity theft services, AllClearID.com and IDSafe now offer their basic service for free. Each offers a somewhat different approach and requires a different set of private information so be sure to look at both of them. Their goal, of course, is to get you to upgrade to their paid version, but the free version may well be all you’ll ever need.
Both of these free versions scan the internet for possible trouble and will email you if they find something. They also include some free support to help you in repairing your identity should problems occur, something very handy to have if trouble occurs. If you choose one of these free services, you still need to do other steps above as none of this is foolproof.
- If you have a particular reason to be worried that something has or could happen, a powerful step is to put a freeze on your credit reports. This will essentially prevent anyone—including you—from opening a new account in your name. A credit freeze is also a very good option for the elderly or for anyone that has reached a point in life where they have no intention of opening up new sources of credit. For more on this subject here’s a good article that will fill you in on the pros and cons and how to go about it: http://www.nytimes.com/2011/05/07/your-money/identity-theft/07money.html?_r=3&scp=1&sq=ron.
In summary, be smart about protecting your identity from theft. Always do your research before purchasing any identity theft protection and don’t forget to take the free protective steps that could end up saving you money and hassle in the end. They may well turn out to be all you’ll ever need.