Is Fraud Monitoring Worth It?

The telephone rings as an unidentifiable phone number pops up on the caller ID. After some inner wrangling, you pick up with a cautious, "Hello."  There's a moment of silence before a representative from a banking institution offers the deal: For $12.99 a month, you can have the safety of a fraud monitoring service that can protect you from being the next victim of identity theft, with a free credit report to boot. Sound familiar? It should. Companies are offering consumers these types of services by phone, by mail and through television advertisements for hundreds of dollars a year with the promise of big savings if victimized. But are they worth it?  Besides the peace of mind factor, many experts seem to think there are better options--for less.

"They really aren't doing anything extra that you can't do yourself," says Tanja L. Darrow, an attorney with Littler Mendelson in Los Angeles.

Sure, you could pay for a basic credit monitoring service to detect if someone is trying to open a new account in your name.  Or you could be proactive, monitor your own credit and add a free fraud alert to your credit report.  That way, creditors should contact you before issuing any new credit in your name.  A fraud alert is good for 90 days and can be extended if needed.

But if there are  "serious, serious" concerns regarding one's credit being tapped illegally, "you could put a credit freeze on your account," adds Darrow of this security option restricting access to credit reports and is free for identity theft victims, but otherwise costs $10.

In the end, any fraud monitoring service claiming it can protect from identity theft is making false promises.  But if trying one out is the only way to bring a sigh of relief, make sure to do your homework. Google to find out service pros and cons, and check with the Better Business Bureau for complaint listings that may help in the decision-making process, advises Linda Foley, founder of the Identity Theft Resource Center in San Diego.  "If you have a lot of discretionary money and you want to do that, and it gives you a sense of peace, do some shopping around," says Foley, but "all have their limitations."