Consumer Reports Money Adviser February 2012 Issue
Debunking ID theft hype—You don’t need an costly service to protect your good name
Money is tight for most people these days, and according to a Consumer Reports Money Adviser investigation, you don’t need to spend it on costly identity theft protection services to protect your good name.
Almost 50 million people subscribed to some form of identity-theft protection in 2010. Those services, which cost about $120 to $300 a year, promise to protect your ID by monitoring your credit reports 24/7, scouring “black-market chat rooms” for your personal information, removing your name from marketing lists, and filing fraud alerts.
“There are cheaper and more effective ways to protect yourself from identity theft,” said Noreen Perrotta. “There are many things you can do for free, such as signing up for online access to your bank and credit accounts and monitoring them frequently.”
In the past, CRMA found that these protection plans provide questionable value. The editors recently dug into the latest products sold by more than two dozen banks, credit-reporting bureaus, and independent companies. Here’s what they found:
Marketers Use Fear as a Sales Tool
Some ID protectors scare up business with inflated claims about crime. But identity fraud is down because financial institutions are doing a better job preventing it. And consumers have become more eagle-eyed about their own accounts, without the need for a paid subscription service.
What you should do. Take the threat seriously, but don’t panic. 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.
A Trial Offer Signs You Up for Recurring Fees
Fifth Third Bank, which serves 15 states, most in the Midwest, and Affinion, a leading provider of ID-protection products to banks, market Identity Alert by offering 30 days of service for $1. Customers can sign up online and must provide credit-card billing information to pay the small fee. But giving up your credit information also allows Affinion to automatically charge your card a monthly membership fee after the trial period, which is disclosed on the sign-up form.
What you should do. Before signing up for one of these services, check out the company with the Better Business Bureau.
Credit Monitoring Can Miss a Lot
Identity-protection companies typically claim they provide you with the tools and support you need to guard against the many ways your information might be compromised. But most of what promoters call ID theft is unlikely to be picked up by credit monitoring, which looks for new accounts that pop up in your credit file and is the core of many such protection products.
What you should do. Sign up for free alerts from your credit-card issuer and bank that will let you know when, say, a charge above $100 is made to your credit card or if your checking balance falls below a certain amount.
Web Monitoring Offers False Security
Intersections, which markets Identity Guard programs, also uses credit monitoring as the core of its products. But it adds “Internet surveillance” to the mix, as a number of other services do. However, once your information is out there — Social Security number, credit-card or bank-account numbers — you can’t get it back.
What you should do. Internet scans could give you a false sense of security if they find nothing and scare you if they find something you can’t undo. Assume the genie is already out of the bottle and put a security freeze on your credit report before trouble strikes.
Million-Dollar Insurance Doesn’t Cover Much
American Express ID Protect Premium, provided by Affinion, says its $16 monthly fee includes “up to $1 million in identity theft insurance.” But ID-theft insurance is secondary to any other coverage that might pay out first, such as homeowners or renter’s insurance, and it mostly covers low-cost incidentals related to or resulting from the crime—notary fees, credit-report costs, loan re-application fees, and a maximum of $1,500 in wages lost “solely” to fix your identity records.
What you should do. Don’t rely much on insurance to protect you. Instead, do it yourself. Consumer Reports Money Adviser recommends signing up for online access to your bank and credit accounts and monitoring them frequently, and periodically checking your credit reports.
Consumer Reports Money Adviser is a monthly, subscription-only newsletter that answers tough money questions and provides expert financial advice. Its proven information and successful strategies can make any financial decision an easy one. Each month, CRMA provides feature articles and helpful investment, savings, and spending advice that will help prepare consumers for anything life may bring them. For more information visit: www.ConsumerReports.org.
Consumer Reports is the world’s largest independent product-testing organization. Using its more than 50 labs, auto test center, and survey research center, the nonprofit rates thousands of products and services annually. Founded in 1936, Consumer Reports has over 8 million subscribers to its magazine, website and other publications. Its advocacy division, Consumers Union, works for health reform, food and product safety, financial reform, and other consumer issues in Washington, D.C., the states, and in the marketplace.