Your Inbox May Be Safer Than Your Mailbox

If you think you're safe from identity theft, take your eye off your PC and make sure you know where your wallet is. That's because a new survey has found that you may have more to worry about from careless paper management than from evil online forces.

With a well-guarded PC, "you are safer in the electronic world," than the real world when it comes to identity theft, says James Van Dyke, founder and principal analyst for Javelin Strategy and Research. According to the 2005 Identity Fraud Survey Report, the average annual loss for someone who discovered they were a victim by reviewing paper records such as credit card statements was $4,543. But those who detected fraud while surveying electronic financial accounts had an average loss of only $551.

"Only with PC or Internet-based monitoring of accounts do you have the opportunity to monitor your account in real time," Van Dyke says. That one small factor can make a big difference when it comes to the amount of time a thief has to collect money using your identity.

Don't Let Your Guard Down

Four thousand consumers were polled for the study, yielding interviews with 507 fraud victims. The results suggest that people have become so consumed with the possibility of falling victim to online theft they have forgotten that traditional theft still exists, says Van Dyke.

"Our concern is that people are essentially letting down their guard," he says. "They need to be more diligent (in protecting themselves from) traditional (offline) crimes."

The survey, conducted by Van Dyke's company and the Better Business Bureau, found that in nearly 70 percent of the cases where the victim knew who the thief was or how the information was obtained, the theft occurred offline. In about 29 percent of the cases, it involved a lost or stolen wallet, checkbook, or credit card.

Only 5.2 percent of victims reported identity theft through computer spyware, 2.2 percent from viruses or hackers, and 1.7 percent through e-mails sent by thieves posing as a legitimate business.

The Federal Trade Commission says the sheer volume of tangible information available accounts for the higher rate of offline theft.

Identity Theft, Fraud Pervasive

Although identity theft is the most commonly used term, law-enforcement groups break this type of crime into two categories. The most common is actually identity fraud, where criminals simulate legitimate businesses such as Net auctions, shop-at-home catalog sales, prizes and sweepstakes, and advance-fee loans. Identity theft, on the other hand, includes crimes such as credit card fraud, phone or utility fraud, bank fraud, and employment fraud.

The FTC says it received over 635,000 complaints of identity theft and fraud during 2004. According to the data, consumers reported fraud losses of over $547 million last year. Of that, about $265 million was Internet-related.

"A lot of law enforcement that we work with and have spoken to about this do their finances online," says Sheila Gordon, director of victim's services for the Identity Theft Resource Center. "It removes the personal element . . . and people steal identities, not computers."

Safeguard Your PC

Gordon agrees, however, that every form of financial management requires safeguards. "Obviously," she says, "you should practice safe PC use. Have your firewalls up . . . don't answer e-mail spoofs or phishing (attempts)," and remember that your bank is not going to send you e-mails or ask you to respond via e-mail."

An FTC spokeswoman, although not willing to recommend switching from paper to electronic management, does agree that it is more convenient to monitor accounts regularly online.

However, "there's a responsibility that comes with it," she said. "If you're the type of person that likes the convenience of the computer but you're not good at updating your software, then you may want to think twice."

Tips to Keep You Safe

If you do decide to make the switch to monitoring and managing your accounts online, here are some tips to keep you safe:

• Consider how likely you are to become a victim. Individuals who have a high income, travel regularly, live in an unsafe neighborhood, or have friends or family members they do not trust completely are considered high-risk. Knowing your risk level will help you decide how much to spend to protect yourself.
• Sign up for electronic account alerts. With this option you will be notified of changes to your account. Keep in mind that very few institutions offer this choice and some charge for it. Before signing up, consider your risk level. Also keep in mind that if you sign up for multiple alerts you may become weary of them and stop paying attention.
• Cover your losses. Most financial institutions have to cover your losses if you become a victim of identity theft. Before opening an account, it is important, however, that you learn what types of losses they cover and how quickly they will cover you.
• Check your accounts regularly. Log on at least twice a week. The faster you notice strange activity on your account the less money you are likely to lose.
• Buy PC protection software. All the alerts in the world won't protect you from hackers and viruses. Make sure you have an antivirus program, an antispyware program, pop-up blockers, and a secure firewall. Additionally, update your software regularly. If you don't keep up with updates then you are probably safer offline.