Got Internet Auction Fever? - recommended security measures for auction participation on the Internet include using an escrow service, paying by credit card, and choosing a site that has a guarantee - Brief Article

Kiplinger's Personal Finance Magazine, July, 1999 by Stephanie Gallagher

* Prices can be great, but know how to bid without getting burned.

Going, going, gone. At Christie's, that's what happens to the merchandise on the block. At a cyberauction, that's what might happen to your money, too. Auctions have quickly become the National Fraud Information Center's number-one category of Internet fraud. Where else would someone pose as the seller and e-mail the winning bidder to request payment? Or switch screen names to secretly bid up his or her own merchandise? Or list goods for sale that don't exist?

That's not to say that most online-auction transactions are crooked. Analysts at Forrester Research estimate that fewer than 1% of them are fraudulent.

A veteran Internet auctiongoer, Bart Moccabee of Hilliard, Ohio, has purchased some 30 items, including movie posters and billiard memorabilia, without a hitch. But the odds caught up with him last Christmas when he placed the winning bid, $560, on a microprocessor and two memory modules on eBay (www.ebay .com). He had no misgivings about the seller until he received e-mails from other buyers warning him to be careful. That prompted Moccabee to complete the transaction through i-Escrow (www.iescrow.com), a service that holds the buyer's payment until the merchandise is received.

It was a smart move. About a week after he charged the purchase, Moccabee hadn't received the computer parts--and an e-mail to the seller was returned. I-Escrow promptly refunded his $560, plus the $12 service fee he paid to facilitate the transaction.

If you enjoy online auctions, here's how to buy without getting burned.

USE AN ESCROW SERVICE.

Services such as i-Escrow and TradeSafe (www.tradesafe .com) protect both buyers and sellers by requiring immediate shipment of merchandise by sellers and immediate payment by buyers. Only after the buyer has inspected the item and deemed it acceptable does the escrow company release funds to the seller. If the buyer pays by check, the service holds the merchandise until the check clears.

Either party can arrange for escrow by contacting the escrow firm directly, and both parties must agree to the terms. Fees are typically 2% to 10% of the transaction amount, depending on the purchase price, and can be paid by the buyer or seller.

CHECK UP ON THE OTHER PARTY. Get an address and phone number, and use an online phone directory, such as Switchboard (www.switchboard .com), to verify the information.

Many auction sites also post buyers' comments about sellers, but they're no substitute for other precautions. In one instance, a seller had favorable ratings after completing several legitimate transactions. Then he listed several rare items, took the money and disappeared.

PAY BY CREDIT CARD. Using a credit card enables you to withhold payment if the merchandise isn't what was promised. At some auction sites, such as Onsale (www.onsale.com) and First Auction (www.firstauction.com), the auction house is the seller and routinely accepts credit cards.

It's more difficult to pay by credit card when the seller is an individual. But Auction Universe (www.auctionuniverse.com) will process credit card transactions on behalf of sellers for a fee of $19.95.

USE A SITE WITH A GUARANTEE. Amazon.com (www.amazon.com) backs its auctions with a guarantee: You will get your money back (up to $250) if the item isn't delivered or is materially different from the seller's description. eBay (www.ebay.com) provides fraud insurance for up to $200 worth of merchandise, minus a $25 deductible. (The coverage is free until September.)

INSIST ON INSURED SHIPMENTS. You can reimburse the seller for the cost of buying postal insurance or participate in an auction that provides it. Buyers and sellers who sign up for Auction Universe's Bidsafe Gold program ($19.95 a year), for example, get insurance that covers up to $3,000 in damage during shipping or once the object is in your home.