Why Some Credit Monitoring Services Are Expensive and Others Aren't

A few years ago, my best friend had his Social Security number and personal information stolen. Since he wasn't using credit monitoring services at the time, he wasn't aware of it until a few months later when the damage had already been done and multiple credit cards had been taken out in his name. What followed was a flurry of activity in which my friend canceled credit card after credit card, only to have more hard inquiries mushroom under his name.

In the end he had to freeze his credit, but to this day, he still wonders who out there stole his identity.

I suppose there are many horror stories like this, but when it happens to someone you're close to, or to you yourself, you realize how vulnerable we all are to identity theft. While preventing identity theft involves multiple security measures -- go ahead and bust out the best password you'll never remember -- credit monitoring services can help you track your credit and stop it before it spreads.

In the world of credit monitoring services, you have three types: those that are free, those that are decently priced, and those that cost double a Netflix subscription. TL;DR: Most free services give you what you need to track your credit score. But if you're a victim of fraud, you might want to pay the monthly subscription fee for the near term to get the bells and whistles (insurance, more alerts, tracking of multiple credit reports).

On that note, let's take a look at why some of these services are so expensive and if they're worth the cost.

Why you might pay for a credit monitoring service

Let me be clear: A paid-for credit monitoring service doesn't monitor your credit more accurately than a free one, per se. Instead, it offers more comprehensive credit monitoring by tracking all your credit reports in one service, or at least those from the big three credit bureaus: Experian, TransUnion, and Equifax. This might be easier than monitoring them separately, which is what you would have to do on your own.

Your package may also include an insurance policy that reimburses you for costs associated with identity theft, or it could have recovery services that help you get your bearings after your identity has been stolen. Many also scan the dark web -- that patchwork of websites that you can't access through search engines -- and will alert you of any suspicious activity regarding use of your information.

The monthly cost for credit monitoring can range from $8.99 to $29.99 or more. If your information has already been compromised, these services could help you stay on top of future fraud. But the costs are high and thankfully much of what they do is included in free credit monitoring services.

Why a free service could be all you need

At the end of the day, credit monitoring services are just that -- a way to stay current with your credit report and nip suspicious activities in the bud. But it's important to note that no service can stop identity theft, nor the fraudsters who apply for credit cards in your name. No matter how much they cost, they can only alert you after the activity has happened.

This monitoring is important, but you don't need to pay to get it. In fact, several free credit monitoring services provide a fairly good level of security. For example, CreditWise by Capital One is a free service that tracks your VantageScore 3.0 credit score. It also scans the dark web and tells you if your information has been compromised. It works fast and has the same capabilities as most paid-for services, save for the added identity insurance.

>> Click here to sign up now for CreditWise. <<

Alternatively, if you're averse to giving your data to financial companies, you could monitor your credit reports for free. Annualcreditreport.com gives you one free credit report from all three credit bureaus every week. It's a do-it-yourself approach -- you won't get alerts -- but it works.

Whether you choose a free or paid service, monitoring your credit is important and can help you catch fraud before it wreaks havoc on your credit score. Take a look at the perks of some paid credit monitoring services, but don't feel as if you must sign up for them if you just want basic reporting. A free credit monitoring service, like CreditWise, could be all you need to keep your identity safe.