Along with the many joys it brings—social media, online shopping, how-to YouTube videos—for 7% to 10% of people each year, the digital age has also created a special kind of misery: it’s called identity theft. While this particular level of purgatory isn’t inescapable by any means, you can get stuck there for a long time. And the financial and emotional havoc identity theft leaves in its wake takes many forms. You can be denied unemployment benefits or other government services because someone else is already using them. Your credit can be shredded. You can be left responsible for thousands of dollars in fraudulent bills. And the psychological trauma of identity theft is no laughing matter, either. According to a study by the Better Business Bureau, identity theft victims report being worried, angry, and frustrated (85.7%), violated (83.7%), and sad or depressed (59.2%). A study performed by the Identity Theft Resource Center found that a full 10% of victims have considered suicide. Yes, it’s that bad.
And No, You Don’t Want to Go There
Taking steps to prevent identity theft is much more pleasant than cleaning up the mess it makes in your life. Identity theft isn’t new—it’s been fodder for the film industry since Charlie Chaplin’s time—but when identity theft became a mainstream scourge during the digital age, the tech industry was fairly quick to fill the identity protection void. The first identity theft protection product was introduced in 2001.
Most identity theft protection products work the same way. They crawl the internet looking for instances of your personal data appearing where it shouldn’t, such as on the dark web, in payday loan applications, in postal service change of address forms, and the like. Credit report monitoring is another key feature of identity theft protection. That’s because identity thieves want to steal your assets. To that end, they set up fraudulent credit accounts in your name and run them up to their limits. Identity theft companies may alert you to any new accounts that appear on your credit report, sharp increases in the balances on your existing account, and negative changes to your credit score. Needless to say, identity thieves don’t pay their bills—or your bills as they’ve become. Late payments have the greatest negative impact on a credit score and you can expect to see a precipitous drop in yours once those late payments start adding up. Incidentally, if you don’t have identity theft protection, it’s a good idea to monitor your credit report on your own. Many banks provide FICO score monitoring as a courtesy to their customers. But you can download one free copy of your report from all three major credit bureaus annually. Nowadays, given the frequency of identity theft, you’d be better off tracking your credit score more often than that.
Identity theft protection offers one key benefit that’s hard to replace on your own. Most come with a unique type of insurance policy. If your identity is stolen while you’re covered by an identity theft plan, you can make a claim for the financial losses you incur as a result of the theft. The identity theft protection company will also assist you with the painstaking process of rebuilding your identity and your credit. Coverage is typically limited to $1 million.
How Do Identity Thieves Operate?
You can reduce the risk of identity theft by understanding the tricks of this particular criminal trade. Old-school identity thieves used to dumpster dive in search of financial documents like bank and credit card statements. It’s still a good idea to own a shredder. But today, most identity theft is perpetrated by stealing digital documents. Many times it’s impossible to access the products and services we want without providing personal information. But be particularly stingy with such information as your social security number. Don’t hang out on public or unsecured Wi-Fi networks. In other words, don’t go shopping for a credit card or the best mortgage rate at Starbucks.
Phishing is a popular technique among identity thieves. You may receive an email that appears to be from a business you trust. But when you click on the link it contains, you’ll be taken to a fake website, where you’ll be prompted to provide your password to continue. Stop right there. Phishing schemes are commonly executed via phone calls and text messages, too.
Skimming is the process of stealing information from card swipes. Identity thieves install skimmers where card swipes are most likely to happen: at gas pumps and ATMs, for example. Skimmers collect data from unwitting customers’ cards. So if you frequently use a debit or credit card, you may be at greater risk for identity theft. Sometimes, skimming can be an inside job. Criminally-minded employees may install skimmers where they work, particularly in restaurants, supermarkets, and other retail locations. There are ways to detect whether a skimmer has been installed on a card reader. Sometimes fake card readers are installed on top of legitimate readers. Avoid using a reader if it feels wiggly or out of alignment. If a card reader seems janky in any way—if it looks or feels suspicious— don’t use it. Keep in mind, too, that payment technology has evolved. If you haven’t considered using a digital wallet, now might be the time. Digital wallets decrease the risk of identity theft, but they aren’t perfect. The greatest danger they present is that they reside in your smartphone, which can be lost or stolen. Always lock your phone and use 2-factor authentication or its face recognition feature if available. And don’t keep a list of passwords on your phone. That’s a common practice. But it puts every account you list on your phone at risk for fraud.
Conventional Wisdom Can Protect Your Conventional Wallet
New payment technology has gained traction. But most of us still carry a wallet in our pockets or purses. What you keep in your wallet can hurt you. It’s not just your cash that criminals are after anymore. So take steps to protect your physical wallet, too:
- Never keep your social security card in your wallet. Your SSN can be used to open fake bank and credit accounts.
- Don’t keep a blank check in your wallet. You stand to lose a lot of cash. Your wallet also contains ID that thieves can use to write a check easily, especially now that many cashiers scan your license or other ID without even glancing at it.
- Once again, don’t keep a list of your passwords in your wallet.
- Keep as few credit cards in your wallet as you can. The more you keep, the more opportunities a thief has to run them up, the more accounts you will need to freeze, and the more new cards you’ll have to wait for.
- If you haven’t used a card in a while, you may think you don’t need to look at your statements. Many people are in the habit of just tossing them away. Always read your bank and credit card statements and be on the alert for charges you don’t recognize.
- The risk of identity theft increases with every piece of identifying information you keep in your wallet. So keep your wallet slim. You’ll feel more comfortable in more ways than one.
Is Identity Theft Protection Worth It?
Paying for identity theft protection may prove itself invaluable. But you may not have to pay for it at all. Credit card issuers, banks, and your homeowners or renters insurance company may provide identity theft protection as a courtesy. It protects them, too, of course. So before you pay for a separate service, check with the financial services you already do business with to see if they offer this important benefit.