(MONEY Magazine) – An official-looking piece of mail from the Credit Card Bureau of America came to our attention recently, urging its recipient to phone a "credit monitoring hotline" for important credit report information. That hotline turned out to be a recorded warning that "right now, someone, somewhere, could be making unauthorized charges to your credit cards or stealing your identity to get credit in your good name."

Sounds ominous--enough, perhaps, to make you want to pay for some protection, right? That's just the idea. In fact, an entire industry has developed to prey on heightened credit fears, some stemming from the growth of online buying and the perception that credit-card information sent over the Web is easily stolen. You'll be forced to cover a thief's tab, so the thinking goes, and the process of clearing your name will be tortuous, if not impossible.

But few of these services are worth the cost. For starters, experts say that Internet-related fears are largely hype. "I haven't heard of a single instance of private information stolen while in transit over the Web," says David Medine, who is the associate director for credit practices at the Federal Trade Commission. "The risks are way overblown."

Even if you are the victim of credit theft, the consequences aren't nearly as dire as some would have you believe. The issuers of the new Yahoo credit card and the AT&T Universal card promise to indemnify you against Internet transactions improperly made with your card. Yet under federal law, as long as you report an unauthorized charge within 60 days of the date of your bill, you can't be held liable for more than $50. In practice, credit-card issuers rarely ask victims to pay a dime.

Some appeals hype credit dangers even more. Last September, for example, the FTC filed a lawsuit against the Tracker Corporation of America alleging deceptive telemarketing. Under the name "Consumer Protection Services," the firm sold $189 insurance policies that covered up to $10,000 in unauthorized credit-card charges. The pitch, says the FTC, was that by the time you saw such charges on your bill, it would be too late to have them removed. An attorney for Tracker says the firm did nothing wrong but has agreed to put a stop to this practice. The FTC's Medine says other firms are under inquiry for similar pitches.

Even though your losses can't top $50, fraud can decimate your credit history. Identity theft--a scam in which a thief uses your Social Security number to open credit lines in your name--can result in Kafkaesque tales of injustice and impenetrable bureaucracy. Hence firms, including the author of the heavyhanded letter mentioned above, offer to monitor your credit-bureau files and alert you of any changes. But you're probably overpaying for a less than surefire solution.

For one thing, you'll still have to clear up any mistakes they find. More significantly, you can get credit reports yourself for less. Monitoring services pull data from one or more of the three major bureaus--TransUnion (800-888-4213), Experian (800-682-7654) and Equifax (800-685-1111). If you want reports from each (which is probably unnecessary, say experts), the most you'll pay is $24--way less than the $50 to $70 a year monitoring services charge.

What you're paying extra for, then, is convenience and ongoing oversight. Checking your credit history once a year is enough for most people.

One exception: Former fraud victims are the most logical candidates for monitoring services, says Beth Givens, director of the Privacy Rights Clearing House. Identity thieves are seldom caught, and retailers and lenders don't always check for fraud alerts--a note in your credit file telling creditors not to open new accounts without getting in touch with you.

The most popular monitoring service is PrivacyGuard (800-374-8273), which also markets the Credit Card Bureau of America's service. For $59 a year, you get quarterly summaries of all three major bureau files and alerts to any changes. Another service we like is CreditConfidence (800-777-9700), which charges $69.95 a year and goes light on the scare tactics. --Scott Medintz