First things first. That $50 figure only applies to fraudulent credit card usage. It does not apply to debit card use, or other fraudulent access to bank/checking accounts.
Second: Yes, Federal law limits your liability for unauthorized charges made on your credit card after it has been lost or stolen. But only if you report the loss within a “reasonable time.” That time is usually 30 days. We don’t know about you, but 30 days goes by in a flash for us sometimes. Are you willing to take the risk?
If you are, just beware that you could be liable for the entire amount stolen from your bank accounts directly or through debit card usage if you don’t catch the fraudulent activity early on.
Uh oh. So what’s my real risk, then?
Well, that all varies on a case-by-case basis. But identity theft victims do suffer real damages, according to the FTC:
- An average of 175 to 200 hours (5 full work weeks) spent repairing damage done to their credit rating.
- An average of $1,100 in out-of-pocket expenses for repairing their credit rating.
- Loss of creditworthiness and access to financial services, telecommunications and utility services, and even employment.
- Loss of wages to collection agencies and garnishments.
- Loss of tax refunds withheld due to bad debts or other penalties.
- Loss of driving privileges or other licenses, some professional.
- Potential for being arrested and detained.
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Paying for ID Theft Protection Is Not Necessary
You've seen it on TV and on the Internet. You've seen it in the mail. You've seen it in buses, cabs, and trains. You should be afraid. ... very afraid.
The message everywhere is pretty much the same: "Identity Theft is the Nation's #1 Crime!" or "Identity Theft Now Surpassing Drug Trafficking as the Nation's Biggest Threat!"
Recently, the "Big Three" credit monitoring bureaus have been marketing assorted variations of "Identity Protection" products. In their marketing materials they claim (among other things):
* identity theft is now surpassing drug trafficking as the nation's #1 crime
* there are over 10 million victims of identity theft annually
* the average victim of identity theft spends 28 hours and $5,686 to resolve the case
The mailers typically cite a reputable source, such as the U.S. Department of Justice Statistics and the Federal Trade Commission, to name two examples.
If you believe the hype, you'll believe that identity fraud is running rampant. Between corporate breaches and online exploits against individuals, hackers are stealing identities in record numbers and posting it to the Web from all over the country, right?
We say, BUNK.
This isn't to say that identity theft is nothing to worry about. Identity theft is a serious crime. It's certainly very common, and any smart consumer should take steps to protect themselves in the event that their identity is lost, stolen, or otherwise compromised. With that in mind, let's get to debunking a few myths...
BUNK: There is a higher incidence of ID fraud today than in past years.
TRUTH: Javelin Strategy and Research, which has conducted a mega-study on U.S. identity theft and fraud annually for the past five years, has definitely recognized a trend. But it's downward, not upward.
According to Javelin's 2008 survey, some 3.58 percent of respondents reported experiencing online fraud during the previous year. That's down from 3.74 percent in the 2007 study, 4.0 percent in the 2006 study, and 4.7 percent in the 2003 study.
In fact, Javelin says, the identity fraud incidence rate has decreased every year since the research firm began doing the report five years ago.
BUNK: There are more victims of identity theft and fraud today than there have ever been before.
TRUTH: According to the Javelin study, there were approximately 8.1 million victims of ID theft and fraud last year, but that number is down, not up, from the year before.
In fact, just like the incidence rate, the number of ID theft victims in the United States has dropped every year since Javelin began conducting the study. Approximately 10.1 million people reported experiencing fraud or theft in the 2003 study; that figure had dropped to 8.4 million by last year, and 8.1 million this year.
BUNK: Identity thieves are stealing record amounts of money from their victims.
TRUTH: Despite reports of big-dollar thefts and a booming black market for credit cards and other personal information, the cost of identity fraud and theft underwent its most precipitous drop last year, according to Javelin.
After hitting an all-time high of $58 billion in 2007, ID fraud and theft totaled just $51 billion in the U.S. this year, Javelin says. The $7 billion drop was the largest in the history of the research.
The drop also is the first that Javelin has seen since it began publishing the study in 2003. From 2003 to 2007, the fraud damage figure was on a steady incline, going from $56 billion to $58 billion and increasing slightly every year, until this year.
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