The Financial Cost of Identity Theft

in Financial Planning by

KEY POINTS
  • Shred any personal information you don’t access that often.
  • Steer clear of suspicious activity online.
  • Monitor your bank accounts and cards to keep an eye out.

Part Of Our Series On Tackling Your Scary Personal Finances

Living in the Digital Age, identify theft is an issue affecting more people than ever. From your apps to your emails, it seems like cybercriminals are everywhere these days.

In the US alone, identity theft is currently the fastest growing crime, with 9.9 million incidents per year (according to the Federal Trade Commission). Identity theft is a growing, expensive issue, costing its victims billions of dollars every year.

At Personal Capital, our highest priority is keeping our users’ financial data safe and secure. That’s why we use bank-level encryption to keep account, information, and money safe. But in every other part of your life too, we want to help you avoid the perils of cybersecurity threats. So read on to understand what kind of financial pickle identity theft could put you in, and how you can take action against this serious crime:

Stolen Funds

While many financial institutions only hold identity theft victims responsible for up to $50 of fraudulent charges, other types of fraud cases require pricey outside counsel to resolve. The average victim today spends nearly $500 and 30 hours resolving just one identity theft incident.

Loss Of Time

Stolen money may eventually be recovered, but the time it takes to solve an identity theft incident doesn’t get paid back. Even in the simplest fraud situation, consumers spend hours contacting banks, credit card companies, phone companies, utilities, or retailers to resolve the situation. And the more widespread the theft, the more time it will take to settle.

Legal Issues

If an identity thief has your sensitive personal information, like a social security number or driver’s license, they can use that to take out a mortgage, write bad checks, or even commit crimes in your name. It’s a scary thought, but all of that can add up to big legal bills in order to extricate yourself from the situation.

How To Reduce Your Risk Of Becoming An Identity Theft Victim

The best way to fight identity theft is to implement a plan to stay as safe as possible, and detect issues early. While no plan is foolproof, try out these tips to take identity security into your own hands:

1. Lighten And Shred

When you leave your home, carry only what you need, and make sure to leave your Social Security card safely at home. It’s also a good idea to shred all paperwork with identifying information, such as receipts, credit offers and applications, medical paperwork, old checks, and expired credit or debit cards. Also, only dispose of old computers or mobile phones once you have removed personal information from them.

2. Stay Safe Online

A good rule of thumb is to never provide your personal information (especially your social security number or credit/debit card information) over the phone or the Internet unless you’re the one who initiated the transaction. Even then, be cautious any time you give it out.

Identity thieves often target new prey through phishing emails, posing as trusted companies or people you might know. So beware of clicking links within emails from people you don’t know, especially any time they contain an unusual amount of typos. If an email is unexpected or seems at all suspicious, follow your gut.

Be sure also to use strong passwords and to change them often. Resist the urge to use the same or similar passwords for multiple sites, no matter how easy they might be to remember.

3. Monitor Your Accounts

Early detection is your friend when it comes to dealing with identity theft. And because the misuse of accounts already in existence constitutes the bulk of identity theft, this is a good place to focus your efforts.

You should regularly monitor the activity of your financial accounts for unauthorized activity, an easy task with a personal finance app like Personal Capital. Also try credit freezes and alerts to keep new accounts from being opened in your name. A fraud alert requires potential creditors to take a few extra steps to verify your identity before opening a new account. A credit freeze keeps potential creditors from viewing your credit report at all, and it can easily be lifted any time you need to apply for credit yourself.

Finally, regularly examine your credit reports, looking for unfamiliar accounts or unknown transactions.

4. Pay Special Attention To Your Tax Returns

According to the Federal Trade Commission, tax identity theft is on the rise. In 2010 only 15% of the identity theft complaints received by the FTC were tax identity theft; by 2012, that number grew to 43%.

If you get a letter from the IRS saying that two returns have been filed for you, or that you were paid wages that weren’t included on your return, those should be red flags for tax identity theft, and you should contact the IRS immediately.

If, despite your best efforts, you become one of the growing numbers of people who experience identity theft, visit IdentityTheft.gov to start resolving the matter as soon as possible. The site will give you a checklist that can help limit the financial damage, and restore your credit.

And remember, as you’re preparing to stop identity theft in its tracks, start out by keeping a close eye on your financial accounts!

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Julie Mayfield

Julie Mayfield is a freelance writer and blogger specializing in personal finance and lifestyle topics. She is the creator of two blogs: The Family CEO and Creating This Life. She has written for the U.S. News & World Report website, is a contributor to The U.S. News Guide to Paying for College, and has appeared in Woman’s Day magazine and on NBC’s TODAY show.

4 comments

  1. Michael @ Financially Alert

    Great tips Julie! It’s crazy how prevalent identity theft is becoming these days. It’s no longer a matter of if, but a matter of when. I’m incredibly detailed about securing my data, but literally 1 week ago, someone compromised my credit card with a fat $700 charge to Ticket Master.

    Luckily it stuck out like a sore thumb and AMEX worked with me quickly to dispute it. But, despite my precautions, all it takes is for a single retailer to have their data compromised and then so is yours!

    So, as you said above, definitely monitor your accounts often!

    Reply
  2. Jordan

    Very important points here. Identity theft is no joke, and can have incredibly long-term consequences. It’s essential that people know how to protect their identity. Thanks for sharing!

    Reply
  3. yyz guy

    Very nice article. I think you understated the value of a credit freeze. For those who rarely need to open new credit, this should be a standard practice.

    Frozen credit reports reduce the attack surface greatly. It sure beats finding out about fraudulent credit opened in your name AFTER it happened! It’s also alot easier than you might expect. Just search for “credit freeze” at each reporting agency.

    Cheers

    Reply
    • Timothy

      Agreed. Getting your credit frozen only costs you like $10-$20 too so it’s not even expensive. Definitely something everyone should know about in case of emergency.

      Reply

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