New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Auto CDs &
Retirement Checking &
Taxes Personal

Protect yourself in online auctions

Online auctions are an e-commerce phenomenon. But watch your back when you log on to sell and buy.

Tyler Sullivan has experienced a good auction deal gone bad.  "At the time, I was clueless," says the 18-year-old student from Green Bay, Wis. "I had no warning."

Sullivan sent $115 by money order to an online seller, and waited, and waited ... and waited. Unfortunately, the seller had duped him. "I was just left wondering," he says.

- advertisement -

Escrow accounts
Sullivan found I-Escrow, now called For a small fee that is based on the cost of the items, acts as a go between for buyers and sellers.

When purchasing an item online, buyers send their money (usually a check) to rather than the seller. When the check clears, tells the seller to send the item to the buyer. If it meets the buyer's satisfaction, the escrow service sends the payment to the seller.

"We offer real protection for sellers as well as buyers," says Johnny Wong, a spokesman for, in Redwood, Calif. Wong suggests sellers state that they will only deal through an escrow service, and bidders request use of the service when they place their bids.

Auction fraud is unusual but worth your attention. On any given day, there are 6.5 million items for sale on eBay, the Internet's best-known auction house, based in San Jose, Calif., and another 1 million new items are added daily. Sales per day are approximately $26 million. eBay's rate of fraud rate remains below .01 percent.

eBay's security begins with the initial registration. Setting up an account requires supplying a name, address, phone number and e-mail address. eBay's strong privacy policy guarantees this information will not be shared with other sites or dealers.

Member in good standing
For any transaction on sites including eBay, Yahoo! Auctions and Auctions, you should exercise caution. Kevin Pursglove, a spokesman for eBay offers three simple steps that can help keep you safe on eBay.

  • Take a few minutes to read the user agreement. Become familiar with the rules and regulations as a bidder and a seller.
  • Check in eBay's Safe Harbor area to learn about all of the avenues available to you as a buyer or seller. eBay will insure transactions through Lloyd's of London.
  • Use eBay's feedback forum. Read the ratings and comments that other users have left about the member you're dealing with before you make the bid. e-mail the person with any questions to make sure you're perfectly clear with all of the aspects of the trade.

"Educate yourself, and use an educated and informed approach when dealing with online auctions," says Pursglove, adding that escrow services offer another layer of protection.

If you play it safe, you can buy and sell without being sorry. Scot Wingo, CEO of, an online auction shopbot based in Research Triangle, N.C., has completed 50 to 100 successful online auction transactions.

"It's a great way to find things to support a hobby, and some people have even made it a full-time job," Wingo says.

Wingo has his own tips for auction protection:

  • Never buy from a dealer who has less than 10 good sales in their feedback rating.
  • Be specific about what you will accept from a buyer when you place your item up for bid. For example, require that the bidders have a certain feedback rating to bid on your item. If a bidder doesn't meet your criteria, sell the item to the next highest bidder.
  • Personal security issues are a factor in online auctions. When you send a personal check with your address, phone number and checking account number on it, there's a concern for safety.

"I've heard of sellers showing up at buyer's houses with the merchandise if they live in the same town," Wingo says.

Even if you follow all precautions, there's still a small chance of problems. But eBay and other online auction houses are doing what they can to keep these troubled transactions at bay.

"We've implemented programs to boost confidence and trust," says Pursglove. "We've hired a formal federal prosecutor and members of law enforcement to stop anyone from violating the user agreement, reducing the number of fraudulent transactions, and apprehending violators."

If you have a bad transaction, you can file a complaint though eBay, and the complaint is immediately sent to the Federal Trade Commission in Washington.

"We're working hand in hand with the FTC to develop ideas for safe trading," Pursglove says.

Wingo adds: "The majority of the people out there have good purposes with their trades. But for every 100 good transactions, there's a risk for one bad one."'s auction safety checklist:

  • Before you act, find out what your options are if the deal goes bad
  • Read an auction site's user agreement for rules
  • Check a buyer or seller's feedback rating
  • Beware of compromising your personal security
  • Consider an online service that acts as a financial go-between


-- Updated: Jan. 18, 2002




Looking for more stories like this? We'll send them directly to you!'s corrections policy
Print   E-mail

30 yr fixed mtg 3.80%
48 month new car loan 2.97%
1 yr CD 0.70%

Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?

Begin with personal finance fundamentals:
Auto Loans
Credit Cards
Debt Consolidation
Home Equity
Student Loans

Ask the experts  
Frugal $ense contest  
Form Letters

- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here. ®, Copyright © 2015 Bankrate, Inc., All Rights Reserved, Terms of Use.