Credit-Monitoring Services: A False Sense of Security:

With the ink barely dry on headlines about what could be the biggest security breach in history (identity thieves hacked into payment processor Heartland Payment Services, possibly gaining access to the credit-card information of millions of consumers) signing up for a credit-monitoring service may have jumped a few notches on your to-do list.

After all, paying $12 or so a month seems like a small price to pay for the peace of mind that — through regular alerts about activity on your credit reports and other monitoring services — you’ll be protected from identity theft. Right? Think again.

“For most consumers, these services are a waste of money,” says Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse, a nonprofit consumer information organization in San Diego. They don’t do anything that consumers can’t do themselves, are laden with loopholes and, in some cases, use questionable marketing methods to get consumers to sign on.

Nevertheless, the credit-monitoring business is booming. Last year, 33 million people, or 22% of the U.S. adult population, used such services, according to Javelin Strategy & Research, a financial-services research firm. And the firm expects the market to grow at double-digit rates over the next several years.

Consumers, however, need to understand what it is they’re actually buying.

See the full story at SmartMoney.