Should You Use Them?
In general, identity-theft protection companies provide little that you couldn't do yourself for free, says Foley. Instead, for a monthly fee, these companies provide the convenience of doing the legwork for you. Keeping tabs on your identity yourself can be a time-consuming, labor-intensive process.
You should keep in mind that these companies aren't end-all, be-all protection services. Stephens says that not all identity-theft protection services offer credit monitoring, for example--and when they do, they may pull credit reports from only one of the three major credit bureaus.
Protect Yourself...By Yourself
The good news is that you don't have to depend on a third-party identity-theft service to protect yourself. As the FTC notes, you have a number of ways to shield yourself from identity theft without paying for a service.
The easiest way is to keep a close eye on your bank and credit card statements. Take a thorough look at the charges; if anything seems suspicious, call your bank or credit card provider.
Also, be sure to get one credit report from each of the major credit bureaus every year. Doing so is free at AnnualCreditReport.com. If you suspect that your identity has been stolen, you'll be able to place a fraud alert on your credit report that can help deter thieves from opening credit card accounts in your name. A regular fraud alert lasts for 90 days; an extended fraud alert persists for seven years. Additionally, you can put a freeze on your credit report to "lock" your credit if it has been compromised.
Financial institutions typically offer some credit-monitoring services, usually for a monthly fee. Your credit card provider may also have some sort of credit monitoring, as do some AAA auto-club chapters. Stephens notes that these services are usually more cost-effective than subscribing to an ID-theft protection service.
A proactive measure that you can take is to use virtual credit card numbers for online payments. These virtual credit card numbers, available from many banks, are one-time-use numbers that you enter in place of your actual credit card information. If a thief gets ahold of the virtual credit card number, it's useless to them. For more, see Erik Larkin's "Go Virtual for Safer Online Shopping."
Beyond credit reporting, pay attention to other areas of your life. For example, be on the lookout for medical benefits payouts for treatment you've never received. If you're contacted about payment for a phone or utility account that you've never opened, there's a good chance that your identity has been compromised. If this happens to you, the FTC recommends that you file a police report.
For more information on how to protect yourself from identity theft, as well as how to recover from identity theft, see the FTC's identity-theft microsite.