Identity theft has become a massive problem as it affects millions of people globally and costs victims billions of dollars annually. In the United States, it remains as one of the most common and expensive cybercrimes, and a recent Pew Research report shows that about 48 percent of victims said that hackers stole their debit or credit card information to make fraudulent charges. No one is safe as the majority of Boomer, Millennial, and Gen Z adults have become a victim of at least one type of online scam. Business and corporate identity fraud have also become more rampant, with nearly 60 percent of organizations reporting growing fraud losses recently, causing widespread concern in various industries in the country.
The financial impact of identity fraud can be devastating as it can lead to escalating personal debt. However, the true cost of this type of cybercrime goes far beyond direct financial losses, and the repercussions can change the lives of victims for many years. Here’s why identity theft is costlier than you think.
Out-of-Pocket Losses
According to the Identity Theft Resource Center, more than half of small to medium enterprises lose $250,000 to $1 million for a single identity fraud incident, and up to nearly $4 million or more for larger attacks. This is why many businesses are now integrating security solutions into their systems as protection from infostealers who are looking to launch identity-based threats like account takeovers or business email compromise. Hackers use a variety of methods to infiltrate databases, and investing in cybersecurity tools can be a proactive way to prevent further losses rather than just reacting to them.
Apart from directly losing significant amounts of money from hacked bank accounts and unauthorized credit card charges, many victims also have to pay out-of-pocket costs to recover their identities. Some businesses and individuals hire specialized attorneys to dispute fraudulent debts and overcome legal obstacles. They also pay postage and notary fees to send police reports, affidavits, and dispute letters to creditors and credit bureaus. Following a breach, many victims will spend on upgraded security systems for their personal devices. While the total cost of all these expenses may be smaller than the amount lost in the incident itself, it can add to the victims’ burden since these can build up over time.
Loss of Potential Earnings
Many victims spend hundreds of hours over several months resolving an identity breach. It takes significant time and effort coordinating with banks, law enforcement, and credit bureaus, so many individuals are left with no choice but to take unpaid time off from work to handle disputes. Meanwhile, business owners and freelancers whose sensitive data is compromised may lose the ability to secure lines of credit, bid on contracts, or continue operations while their accounts are frozen for investigation purposes. As the investigation drags on, it can make their funds dwindle, eventually leading to business loss or failure.
Emotional and Psychological Toll
An identity breach can trigger psychological trauma, and it may cause severe emotional harm. Victims often blame themselves for being careless or uninformed, and they feel ashamed or guilty, especially if other people were also affected by the identity theft incident. What’s more, they feel violated or exposed since having personal details leaked and exploited for malicious reasons can make them feel unsafe in the real world. On top of all these, having to navigate paperwork and resolving disputes can leave individuals feeling lost, helpless, and overwhelmed, which can lead to stress and mental health disorders like anxiety or depression. It can even lead to symptoms like sleeplessness, elevated blood pressure, and physical pain, which may develop into chronic health problems later on.
Practical Ways to Prevent Identity Theft
To avoid going into financial ruin from identity theft, plan on building a core defense strategy to protect your personal data. Use complex, unique passwords for every site and business platform, and use a password manager to store them securely. Check your financial records as often as possible and report any irregularities the minute you spot them. Store sensitive documents and IDs at home, and only carry what you absolutely need. Lastly, be cautious about what you share on social media, and shred any documents that contain personal information before discarding them.
The true cost of identity theft goes beyond financial losses from the incident. Practice good cybersecurity habits to prevent out-of-pocket losses, loss of potential earnings, and emotional distress, and keep your sensitive data safe from threat actors.
