David Prosser: Shredding light on anti-fraud offers

Capital One, the credit card provider, has even started using the issue of identity theft to sell more of its plastic. Its new year TV advertising campaign barely mentions interest rates - instead, it concentrates on the free identity-theft assistance package that comes with its credit cards.

The truth is that genuine identity theft remains a pretty unusual crime. What companies such as Capital One are talking about when they raise the spectre of identity theft is fraud - someone stealing your credit card details, for example, or opening a bank account in your name.

It's unpleasant being a victim of this crime, but that doesn't mean you need an identity-theft assistance package to help you through the experience - let alone the identity theft insurance policies that several companies now sell.

In fact, the financial services industry has been remarkably supportive of customers targeted by fraudsters. Unless you've been exceptionally negligent with your personal details, banks and credit card companies will almost always refund any losses you incur due to fraud. Nor will your credit history be affected, as long as you notify the ratings agencies of any problem.

True identity theft, meanwhile, is much more insidious. It's where a criminal steals enough of your personal details to set themselves up as you, taking out mortgages, credit cards and insurance policies in your name. Sometimes fraudsters even apply for passports and driving licences in your name, which can implicate you in criminal activity.

This sort of crime can take much longer to unravel - it becomes difficult to work out who is the real you. But, fortunately, instances of true identity fraud are few and far between.

This doesn't mean people should be blasé about fraud. By all means, take precautions to beat the criminals - shred sensitive financial documents before throwing them out, take care on the internet and be cautious when using cashpoints or chip and Pin machines.

But don't let people prey upon your fears to sell you services you don't need. The mainstay of Capital One's identity-theft assistance package is a telephone helpline that can give you advice on who to contact if you become a victim of fraud. Nothing wrong with that, but it's not something to write home about.

As for the insurance packages offered by companies such as Callcredit and Halifax Bank, don't waste your money. They'll simply help you fill in a few forms you're perfectly capable of completing without their help. Spend the cash on a shredder instead - it will be a much more effective protection against fraud.

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Take care with the "January sales" now being advertised at leading banks and building societies. Several savings and mortgage providers have taken a leaf out of retailers' books, cutting prices on key products for a limited period to mark the new year.

It sounds good, but a mortgage is a much longer-term commitment than a coat or a sofa. You need to do some careful sums to work out whether you'll really end up saving money by switching to a new financial services provider during one of these sales.

In most cases, the sale prices only last for a limited period, after which you'll pay more. Overall, the total cost of your mortgage, loan or credit card may be higher than it would be at non-sale companies.