I’m sure all of you have heard commercials for or received emails about Identity Theft Services like LifeLock or IDGuard and thought, “I’m afraid of having my identity stolen, maybe I need that?” Well, it’s seems reasonable enough, but actually, it’s NOT WORTH paying for one of these services in my opinion.
First, let’s differentiate between identity theft and credit card fraud.
- Identity theft – someone steals your social security number, address, birthdate and other identifying information to pretend to be you with the intent to defraud (e.g. get loans, withdraw money, etc.)
- Credit card fraud – someone steals your credit card or number and uses it to buy stuff.
People confuse the two, but ramifications for you as the victim are very different. Credit card theft has limited liability for you, the victim and Identity theft can be devastating and time-consuming to fix.
Here’s 3 reasons why I don’t believe it’s worth paying for an Identity Theft Protection Service:
- Monitoring services find fewer criminals than you do (and a lot fewer than your credit card company). The Department of Justice found that over 50% of account fraud was discovered by banks or credit card issuers, 33% was discovered by account and card holders (that’s you) and less than 1% was discovered by identity theft and credit card monitoring services.
- Most theft is credit card fraud where the victim’s liability is limited. Of the 13 million “Identity frauds” in the last year, 81% are credit card (or card number) thefts. Credit card theft is up 46% from 2012 to 2013, which means you should be careful about how you use your card, but your liability for purchases made on a stolen credit card is about $50 and that amount is also usually waived by the card issuer. Not to say we want more credit card fraud, but it is not the nightmare that full identity theft is.
- Identity theft rates are down because it’s just too difficult to steal identities and it’s way easier to steal credit cards. Only 0.5% of consumers had their identities stolen last year, down from 1.2% the year before. Experts think it’s because thieves like credit cards better. It’s easier for them.
As with everything in your financial life, it is always better to KNOW. That means your best protection against theft or fraud is simply taking a look at your credit card, debit card, and checking statement each month. Look at your credit report every year. If you are worried, you may decide to put a security freeze on your credit report, which means NOBODY can look at your credit report unless you unfreeze it. Therefore, anyone trying to open an account with your information will be blocked. Review it! It only takes a few minutes.
If you have never been to a Nike Town and you see a charge for $1,200 from Nike Town in Manhattan when you live in London, England, chances are someone stole your credit card number. By the way, that is how I found out someone stole my credit card number about 15 years ago. I’ve still never been to a Nike Town…