Why you should stop wasting money on fraud prevention
We all waste money on things we could easily live without.
That's no surprise, though, as a quick look at our runaway credit
card debt reveals an obvious fascination with overspending.
However, you might be surprised to learn what some of our most
unnecessary money drains actually are.
Sure, you've got the usual suspects like luxury cars and
oversized homes, but we also can't forget about things like rental
car insurance and fraud monitoring services
While we may consider such things to be essential, they're
actually redundant at best. For example, most credit cards
automatically provide free auto rental coverage, and by choosing to
pay for a policy through a rental company, you're actually negating
what you've already got, not supplementing it.
The same goes for fraud protection. Each year, roughly 50
million people spend an estimated $3.5 billion on identity theft
monitoring services, according to data from Consumer Reports.
Considering that these services simply monitor your credit reports,
remove your name from marketing lists, and search the Web for any
mention of your financial information, that's a couple of billion
- You're entitled to free copies of each of your major credit
reports every 12 months.
- Fraud only impacts a fraction of one percent of all purchases
made with credit cards and debit cards.
- Consumers typically aren't liable for unauthorized
Free access to credit reports means you won't have to shell
out for an expensive subscription service to determine if any
illegitimate financial accounts have been opened in your name. The
other two points mean that fraud poses less of a risk than you
might initially think.
Card Hub's 2013 Consumer Fraud Liability Study supports this
contention. It found that VISA, MasterCard, American Express, and
Discover - the world's largest card networks - all offer $0 fraud
liability guarantees for unauthorized credit card and signature
debit card transactions. Discover cardholders are also covered for
PIN debit transactions as well as at the ATM, and American Express
has its customers' backs at the money machine too (Amex doesn't
offer debit cards with PINs). Federal law fills in the rest of the
gaps by limiting liability to $50 when you report fraud within two
business days and $500 if you do so within 60 days.
In other words, while financial institutions and merchants are
typically on the hook for fraudulent losses, you and I aren't.
Therefore, rather than wasting money on fraud prevention services
and pulling your hair out for fear of potential losses, you should
instead take a chill pill as well as the following measures to
minimize any remaining vulnerability.
- Use a credit card as much as possible: Regardless of
what type of credit card you have, you won't be liable for
unauthorized purchases. That's unfortunately not the case with
- Always sign for debit card purchases: While debit card
transactions "verified" by signature are more susceptible to fraud
than their PIN equivalents, they're also more profitable for
financial institutions. That's why fraud liability policies are
more consumer-friendly when it comes to signature verification. If
you always sign for debit card purchases, you'll also be under less
suspicion should any unauthorized PIN transactions pop up.
- Exercise your right to free credit reports: Not only
will this enable you to spot fraudulent accounts, but credit
reporting agencies also tend to make mistakes, and you'll be able
to sort them out too.
- Safeguard sensitive financial information: In other
words, keep your PIN secret, shred financial documents before
throwing them out, put a lock on your mailbox, and don't e-mail
The aforementioned steps won't cost you a thing, while fraud
monitoring will run you $100-300 per year. In other words, cutting
the latter from your budget in favor of the former will score you
resounding thanks from your wallet.