The identity theft protection business is a money spinner. Most of these services are sold and serviced by banks. They promise to protect you from identity theft by keeping a close eye on your credit reports.
They watch websites and online chat rooms where identity thieves exchange recently stolen ID. Many services also throw in insurance against identity theft. One in seven Americans sees these services as valuable enough to pay about $10 a month for protection.
The buying public doesn’t seem to notice that the banks are legally obligated to compensate account holders for money lost to identity theft, anyway. The banks, though, are so enthusiastic about this business that they hide facts like this. They often also make legally questionable advertising promises (and get penalized by the FTC).
If you subscribe to an identity theft protection service, take a look here at the ways in which the industry takes you for a ride. Once you’re through, you may not feel like trusting them with your protection anymore.
ID protection services routinely hype how common identity theft is. Identity theft crimes briefly climbed in an alarming way between the years 2008 and 2009. Statistics show that incidences of these crimes have fallen dramatically since. These protection services (by Chase and Experian among others) still only point to the old statistics in their advertising.
There is another statistic they conveniently hide – that most of these crimes are of the kind that affects the banks and not individual account holders. Individuals are already protected by federal law against most kinds of card fraud (to a maximum liability of $50 in most circumstances). It doesn’t matter how much someone steals from you – you are covered for it all.
The crime rate is falling too – for two reasons. The first is that the financial institutions have worked to equip themselves better against online fraud. The other is that people better understand how to be careful with electronic transactions today.
In short, all you need is to personally exercise a little care. You don’t need to pay for identity theft protection.
The protection services they offer you aren’t much
There are three kinds of protection that they offer you – credit report monitoring, online monitoring, and insurance. All three are of questionable value.
To begin, credit report monitoring is an ineffective way to protect against ID theft crimes – they are unlikely to notice anything amiss. If they do notice suspicious activity, it can take them days to tell you. The damage is likely to have been done already.
Online ID theft monitoring services scan the Internet for any instances of your personal information. All you gain from it, though, is the knowledge of any identity abuse. Once you know, there is nothing you can do about it. All you can do is to apply for a Social Security freeze so that no new instances of fraud occur.
These ID theft protection services don’t sell you insurance as a separate product – they only throw it in for free. This way, they don’t need to give you any product details. In truth, if you lose $500,000 to identity fraud, your $1 million policy will not help. It will only cover you for incidental expenses to do with correcting the effects of the crime – notary fees, loan application fees and so on.
You can get protected for free
There are many simple steps you can take to protect yourself without paying anything.
- You could be sure to not carry your Social Security card with you as far as possible. You should also not leave your paper tax return in your mailbox.
- When you file a form online with your Social Security number on it (such as your tax return), only do it on a safe computer that you reserve for important financial transactions.
- When you shop online, always use a card that is not connected to your primary bank account.
- Apply to have the banks and credit card companies ask you permission for large transactions.
- Order a free copy of your credit report (and your children’s) each year.
- Protect your bank accounts with secure passwords
- If you receive mail at your home, consider installing a secure mailbox that locks
You only need to take a little care to stay safe. You would need to take these steps even if you did subscribe to a protection service.