With all the news recently about data breaches at major U.S. retailers — Target, Neiman Marcus, Michaels — many consumers might wonder if they should subscribe to an identity theft “protection” service.
The short answer is probably not, if your only concern is a thief fraudulently using your payment card information. Typically, that's not a big deal, and you won't lose any money.
Still, stolen card numbers and other personal information is disconcerting.
“For some people, this is the first time they're experiencing it, they really don't understand it and they are freaking out,” said Eva Velasquez, CEO of the Identity Theft Resource Center.
Can it help to pay money, sometimes hundreds of dollars a year, for subscriptions that offer credit monitoring and other services that promise to safeguard your identity?
Perhaps. But realize that you're paying for a lot of what you could do yourself for free.
“You can't make the blanket statement that all of these services are bad or not worth your while,” Velasquez said. She equates buying such a service to paying someone to wash your car rather than doing it yourself.
Still, many consumer groups are lukewarm to hostile toward such services.
“We feel it's not a good deal,” said Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse, adding that the services have “dubious value.” “It's fairly expensive, and there are other ways you can protect yourself.”
After the Target breach, Consumer Reports was unequivocal on its website: “Don't get fleeced by identity-theft protection services.”
One major point: Services that tout ID theft “prevention” and “protection” are overreaching. They mostly help you only after identity theft has happened. So, one problem is gaining a false sense of security, thinking you can pay for a service and you're done.
“Generally, the value of these services is to alert you more quickly,” said Susan Grant, director of consumer protection at the Consumer Federation of America, which has scrutinized ID theft protection services in recent years. “But no ID theft service can legitimately claim to prevent your information from being stolen or used.”
If you're interested, know exactly what you get for your money, experts say.
Here are a few things to know about subscribing to identity theft protection services.
» Retail data thefts. Generally, ID theft protection services won't help much when card information is stolen from sale terminals in stores.
The best protection you have is detecting it early by monitoring your card's account statements and looking for unfamiliar charges. Don't wait for paper statements, especially after a known breach. Review your card transactions online.
» Credit monitoring. This is often a central part of ID theft protection services. Monitoring tries to identify fraudulent new accounts on your credit reports and alert you to them. But again, it doesn't prevent identity theft.
“Calling credit monitoring 'protection' is misleading and just flat wrong,” said Liz Weston, author of the book “Your Credit Score” and AskLizWeston.com. “Monitoring doesn't prevent the crime. It may just offer you a heads-up that it happened.”
And Consumer Reports warns that “most email and mobile alerts from those services raise false alarms about routine changes in your file. And if fraud is detected, you might not be 'warned' until days, weeks or months after the fact.”
» How robust is monitoring? Some services monitor only one of your three main credit reports. That's of limited use. What if a criminal opened an account in your name, and the creditor checks with one of the other two unmonitored credit agencies?
You wouldn't know right away. For example, the free year of credit monitoring offered by Target after its breach monitors only your credit report from Experian. Still, there's no harm in signing up for it. If you were a victim in the Target breach, go to http://creditmonitoring.target.com by April 23.
» Free credit monitoring. Check your credit reports for fraud yourself at http://www.annualcreditreport.com — one report free from each agency once a year. Unless you already have a problem, it's a good idea to spread them out, checking one report from each credit bureau every four months.
CreditKarma.com offers free credit monitoring through TransUnion, while CreditSesame.com offers free monitoring through Experian. And AAA auto clubs in some places offer free credit monitoring to their members through Experian, Stephens said. Just beware that some free services will try to upsell you on paid services and credit pitches.
» Other fraud monitoring. Perhaps of greater value is when an ID theft protection service says it will monitor public records and commercial databases to find evidence of identity theft. Consumers don't have ready access to those databases, Grant said.
But one company, AllClear ID, offers a “basic” free service along those lines, Stephens said.
» ID theft insurance. Consumer experts generally agree that ID theft insurance is not worth paying for, though it might be a throw-in to a package of services. Insurance doesn't pay you back any stolen money. Instead, it might reimburse you for out-of-pocket expenses associated with cleaning up identity theft, such as copying, postage and notary costs.
“It's really pretty useless,” Grant said. In limited cases, it might reimburse you for time you have to take off from your job to work on cleaning up the mess from an identity theft.
Also, you might already have ID theft insurance through your homeowner's or renters policy, Stephens said. Don't consider it a factor in choosing a service.
» Fraud assistance. Some services say they will help you restore your good name after an identity theft has taken place. But find out specifics. In many cases, they can't do much for you unless you're willing to sign over power of attorney to them, giving them authority over your accounts.
“There's plenty of free advice out there if you do have a problem,” Grant said.
» Do it yourself with a credit freeze. You can place a freeze on your three credit accounts, meaning creditors can't check your credit unless you allow them to. That greatly reduces the chances they will grant credit to a thief trying to open a new credit account in your name. The downside is it typically costs $10 to freeze a report — so $30 to freeze all three — and you have to unfreeze or “thaw” your credit if you want to open a new line of credit, such as applying for a credit card or loan, or subscribing for new wireless phone service. In those cases, you would have to provide a personal identification number (PIN) to temporarily unfreeze your credit.
You could also use fraud alerts, a kind of flag for creditors telling them to verify identification before granting credit. It's free to place a credit alert on your credit files, but it lasts only 90 days before you have to renew it. Ultimately, it might be of limited use. Anecdotal evidence suggests that many creditors don't heed the alerts. “Not all issuers of credit will pay attention to those,” Velasquez said.
For more information on credit freezes — fees vary by state — search online for the Federal Trade Commission's guide with keywords “FTC credit freeze.”
» Act with care. Perhaps more valuable than any paid service is using smart habits to guard your identity, such as not clicking on links in sketchy emails and shredding records with personal data.
And be judicious about giving out your Social Security number, though you'll have to provide it for most identity theft protection products and to get credit reports.
Like many purchases, the value of ID theft “protection” service comes down to personal choice.
“Ultimately, although ID theft is much in the news, most of us aren't going to be victims,” Grant said. “People shouldn't be scared into thinking this is something that they need to have.”