Why Credit Monitoring and Identity Theft Insurance is a Waste of Money

Why pay for something that you already get for free? (I know, nothing is free… but, you probably get it as a perk for a relationship you already have and just don’t know it)


First, let me clarify that I am not a Marketing Affiliate of any of the products or services listed in this article. I will not get paid by Mint, CreditKarma, Discover, Norton, or Farmer’s Insurance if you get an account with them. My recommendations are based on my experience and my research, not based on getting paid by these advertisers.

Second, absolutely no service exists that will stop thieves from stealing your identity. That’s not possible. And, anyone who claims they can stop identity theft is a snake-oil salesman.

Take a look at the picture at the top of this article. It does not matter how fancy, robust, or high tech your monitoring system is. Monitoring… it’s in the name! The only thing a monitoring system does is allow you to watch criminals as they run off with your money.


How to Minimize the Risk of Identity Theft

There is always a risk that someone may try to break into your house. As a result, you take measures to protect yourself and your property, just in case. The same is true of your identity. There is always a risk that someone may pretend to be you and try to spend your money or borrow money in your name.

I look at credit monitoring and identity theft products as similar to home monitoring systems. They don’t stop a burglar from breaking into your home. But, they do alert you when something fishy is going on so you can get the authorities involved quickly and hopefully stop the crooks from doing further damage.

To minimize the risk, I recommend that you do two things:

  1. Watch for evidence that someone is pretending to be you
  2. Protect yourself from losses in case someone is successful

The good news is that every Identity Theft Protection product on the market does exactly these two things.

The great news is that you probably already have other products that include these things as added benefits. And, that’s why paying for Identity Theft Protection is almost always a waste of money.


Watch for Evidence that Someone is Pretending to Be You

When someone steals your identity, their goal is to get money in your name.


If thieves have enough information to pretend to be you at your bank, they can convince your bank to give them your money.

This is bad.

This is why you should monitor your bank accounts either online or on your phone. Then, you can make sure that there are no transactions that you don’t recognize. If you see something you don’t recognize, call your bank immediately and they will help you fix the problem. I like to use Mint.com for this purpose.


On the other hand, if thieves have enough information to pretend to be you at a bank you don’t have a relationship with, they may try to borrow money in your name.

This is bad.

When the thief tries to open an account, almost all banks will pull your credit report at one of the three credit bureaus: Experian, Equifax, or TransUnion. When a bank reviews your credit report as part of a new-account application, you have the ability to get an instant notification.

I like to use CreditKarma.com. They monitor my files at TransUnion and Equifax for free and send me notifications any time someone looks at my credit. And, they will show me an updated credit score once per week, all at no out-of-pocket cost to me. (they get paid by advertisers, not by consumers)

I also have a Discover card, and they provide a similar service for Experian. And, by using both Discover and CreditKarma, I am now covered at all three credit bureaus.

You can do the same: check with your banks and credit cards to see which credit bureaus they monitor, if any. Pretty much everyone can get free monitoring from all three bureaus as a benefit of having an account with the banks where they already do business. We live in a magical time!


Protect Yourself from Losses in Case Someone is Successful

Protecting yourself from losses requires two steps. The first first is to stop identity thieves from profiting even if they do have your information. The second step is to have someone else cover the cost of fixing any damage that is done.

The Best Measures are Preventative Measures.

You can’t guarantee that some criminal won’t ever get their hands on your personal information. There are data breaches all the time. In fact, it is likely that there is enough of your secret information out and available that criminals could steal your identity today.

That’s why I recommend freezing your credit bureau files. It is a pretty straightforward process, it doesn’t take very long, and it will stop almost all identity theft. For detailed instructions, check out my article on How (and why) to Freeze Your Credit Bureau Records.

By locking down your credit bureau files, even if someone is successful in stealing your identifying information, it will be useless to them because they won’t be able to pretend to be you and borrow money in your name.

Have Someone Else Cover the Risk

Unfortunately, monitoring your accounts and your credit, plus freezing your credit bureau files does not stop 100% of identity theft losses. Sometimes, the criminals are successful. When that happens, it sucks. Often, there are costs associated with cleaning up the mess the thieves leave behind.

Fortunately, you don’t have to accept the risk of cleaning up that mess all on your own. And, it is very possible that you already have insurance that covers the risk.

For example, some computer virus protection suites include Identity Theft protection. I use Norton for my personal computer, and some of the packages that they offer include reimbursement of personal expenses, reimbursement of stolen funds, and funds to hire lawyers & experts to help you clean up the mess.

If your computer virus protection service doesn’t include Identity Theft insurance, you may also want to check your Homeowner’s or Renter’s insurance policy. I use Farmer’s Insurance, and I know they offer similar coverage for a super nominal fee. It may be worth checking your insurance policy to see if it is already in there.

And, if that doesn’t work, most banks and credit cards offer Identity Theft Resolution as a free perk of being a member, even if that identity theft doesn’t originate with that bank. Double check your bank’s website to see if you already have that perk.


Final Thoughts

Identity theft sucks. Someone pretends to be you and either steals your money or steals money from someone else and tells them it was you. Lame.

Protecting yourself from identity theft is a good idea. Monitor your bank accounts and your credit bureaus for suspicious activity. Freeze your credit bureau files.

Unfortunately, there is no way to be 100% successful at protecting yourself. There is always a chance that someone will get enough information to pretend to be you. So, not only do you need to try to stop them, you also need to limit the damage they can cause. You can do that by having someone else cover the risk of loss.

To accomplish all of this, it is very likely that the only thing you have to do is activate a few free services or perks that come with accounts you already have.

It is very unlikely that you will need to buy any new services or pay a fee to protect yourself from identity theft. I have my stuff on lock down! And, I don’t pay a penny for it.


I hope this has been helpful! I welcome your comments with your thoughts and questions. And, don’t forget to subscribe to the newsletter to get notified whenever a new article is posted.

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