Americans are spending an estimated $3.5 billion a year on these services. But are they necessary?
Lauren Mirsky considers herself lucky. Thieves tried to use her credit card on two different occasions, but each time they were thwarted.
"The first time it happened, the credit card company called me when they thought there was suspicious activity on the card. The second time, it was actually an airline that called me when they thought someone was purchasing a ticket using my card," she said.
Mirsky was among the 8,000,000 people who fell victim to identity theft in 2010. Plenty of financial institutions are marketing identity theft protection services to people just like her.
However, Consumer Reports Money Adviser Greg Daugherty says the rate of identity theft is actually declining.
"We found the companies often overstate the risk and puff up the power of their services," he said. The companies promise to alert you to suspicious activity with services like daily credit monitoring and protecting personal information including your social security number. Consumer Reports is debunking identity theft hype after looking at nearly two dozen plans that cost $120 to $300 a year.
It turns out you can do much of this monitoring yourself for little or no cost," Daugherty said.
Start by getting your credit report free, once a year, from each of the three major reporting agencies, Experian, Equifax, and Transunion. Look them over for anything suspicious.
"Next put a security freeze on your file with the same credit agencies," Daugherty said. "That blocks access to your credit report and makes it more difficult for a crook to get new credit in your name."
As for Mirsky, thieves were stopped thanks to safeguards that are required by law for financial institutions - another reason you can skip identity theft protection.
Consumer Reports says there are other safeguards worth taking. For example, sign up for free alerts from your card issuer. Those alerts will red flag any unusual charges on your accounts. Also routinely check your credit card statements for unauthorized purchases.