Identity fraud is costing the UK an estimated £1.7bn every year, Home Office Minister Andy Burnham has said.
Conmen have tried to trick people into handing over details online
At £35 per person, the estimated annual cost was greater than that of planned compulsory national identity cards, he told BBC Radio 4's Today programme.
Critics of the scheme accuse ministers of playing on people's fears and say flaws in the security of ID cards mean they could actually increase fraud.
A July 2002 Cabinet Office report put the annual cost of ID fraud at £1.3bn.
ID fraudsters use personal details to gain access to bank accounts, run up bills, and create false documents like passports to carry out benefit crime.
The Cabinet Office's report in 2002 recommended retailers and banks made more stringent checks of IDs, as well as tighter control in the issue of ID documents.
Experts say all documents containing personal information should be shredded before they being discarded and people should be cautious against online banking scams.
Mr Burnham said there were "a range of things people can do to protect themselves" - but compulsory national identity cards would be "a major breakthrough".
Putting a "fingerprint or eye scan" on the cards along with the owner's name, address and date of birth would give them "much greater control over the use of their identity" and prevent criminals registering multiple identities, he argued.
The current lack of "high-standard identification documentation" meant identity fraud could rise, warned the minister.
"We have all kinds of stand-in documents being called upon as identity documents - birth certificates, utility bills," said the minister.
"The truth is these do not prove identity."
For the Conservatives, shadow home affairs minister Edward Garnier, said ID card might well make fraud worse.
"If a criminal cracked the ID card database - and the government's record on running IT based projects does not inspire confidence - they would have access to a gold mine of information," he said.
Mr Garnier urged ministers to stop playing on people's fears and spend the cost of the ID card project on effective measures against fraud and terrorism.
Lib Dem spokesman Alistair Carmichael said the government's claims were fraudulent.
"They are peddling claptrap about the effectiveness of an ID card in combating identity fraud," he said.
"For example, it is impossible to see how an ID card would reduce credit card fraud unless we are going to be expected to show our ID card every time we make a purchase."
Anti-identity card campaigners claim there are weaknesses in the technology to be used in the scheme.
'Bonanza for fraudsters'
The NO2ID group said a Dutch security firm had cracked the encryption on a prototype biometric passport in the Netherlands and been able to access personal data.
The campaign group said identity fraudsters would have an "absolute bonanza" if there were the same problems on the British cards.
But a Home Office spokeswoman said No2ID had failed to mention the Dutch scheme was a test system.
And the system had been cracked because the passport document numbers were unsophisticated - something not the case with UK biometric passports, he said.
Simon Davies, director of Privacy International, cast doubt on the estimates of the fraud costs.
He was one of the London School of Economics academics who previously said the actual costs were a fraction of the £1.3bn estimated by the government in 2002.
And he cautioned people against believing figures produced by the Home Office, which was criticised by a spending watchdog for "extraordinary failures" in keeping track of its finances.