Online Auctions: Bidder Beware!
Internet auctions are big business today. Around for less than ten years, online auctions are now the great phenomenon of the Internet. About 35 million Americans have used an online auction site.
You can shop for everything from out-of-print books to vacation packages to luxury cars to collectables. These huge international flea markets allow you to buy an incredible variety of new and old merchandise from the comfort of your home, often at bargain prices.
But online auctions can be risky even while they are fun and convenient. The major problem—you have to buy things you cannot see from people you don't know. In fact, auctions have consistently been a top ranked Internet-related complaint to the Federal Trade Commission for the past five years with 32,832 complaints filed in 2006. The most usual complaints are that items were never received, arrived damaged or weren't described accurately. Other problems involve bogus online payment or escrow services and fraudulent dealers who lure bidders from legitimate auction sites with seemingly better deals.
You can't make sure that every online auction purchase goes smoothly, but there are some steps to improve your odds.
How Auctions Work
You search for what you want to buy. You can browse by category, for example, "music" or by keyword, "Beatles."
After finding an item you want, you place a bid by saying the most you are willing to pay. The auction's electronic bidding system starts your first bid at just enough to make you the highest bidder. As other bidders raise the bid price, the system makes bids for you, up to your maximum price.
If someone outbids you - or if your bid is lower than the seller's minimum "reserve" price, the system lets you know.
Example:
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Maria wanted to buy an old book on Leonidas Polk, a relative. She placed a maximum bid of $200. Since there was a bid already for $54, the system entered her starting bid at $55. Other consumers raised their bids several times until Maria's top bid of $200 was reached and then passed. She dropped out of the bidding and lost the book. (If the bidding had stopped at under $200, Maria's bid would have won.)
Auctions last anywhere from three to 10 days. If you are the highest bidder when the bidding closes, you get an email saying that you are the winning bidder. Then you and the seller contact each other to make payment arrangements. Generally, sellers ship the items after they receive your payment or once your check clears. After you receive your purchase, you can post your comments - good or bad - about your buying experience. This helps other buyers figure out if they want to deal with that seller.
Payment Options
The large online auction sites accept most payment options. These include personal checks, credit cards, money orders, cashiers checks and payments through billing or escrow services. You either pay the auction house or the seller directly.
Another choice is to pay through an online payment or escrow service. These services act as a middleman between you and the seller. They collect and make sure your payment clears and that you are satisfied with your purchase before they pay the seller. The payment service generally charges 3 to 5 percent of the purchase price, although minimum fees may apply. The buyer or the seller may pay the fee, or they may agree to split it.
The National Consumers League found that most consumers who lost money in Internet auctions paid the sellers directly with a money order, check or cashier's check. These buyers have little protection if there is a problem because the money is already in the seller's hands.
Decrease Your Risk of Fraud
It pays to learn everything you can about an auction site. Check out the "Terms of Use" before using any online auction site for the first time. Be sure you understand how to register, what fees you may owe the site, and the site's bidding process. Many sites have buyer and seller guides on their home pages.
Get Information About the Seller
- Read the feedback the seller has received from others who bought from them and take bad feedback seriously.
- Get the seller's full name, street address, and telephone number (not just an email address or post office box).
- Buy from sellers in the United States. It's less risky than international buying.
Do Your Homework
- Understand exactly what you're bidding on, its real worth and all the costs of the sale, including shipping.
- Comparison shop to find out what retail stores are charging for a similar item.If bidding on appliances or electronics, find out what warranty there is or how you can service the product.
- Set your top price and stick to it. If others bid above your highest bid, be prepared to walk away empty handed.
Guard Your Personal Information
- Only use Internet auction sites that allow you to sign in using secure technology. (You are using a secure site if a locked padlock icon appears on your computer screen or if the address bar of your browser changes from "http" to "https" or "shttp.")
- Never give personal identifying information, such as your Social Security, bank account or driver's license number. Criminals can use it to steal your identity.
- A common phishing ploy is for identity thieves to pretend they are letting you know about a successful bid. If you get an email or pop-up message that asks for personal or financial information, do not reply. And don't click on the link in the message, either. Legitimate companies don't ask for this information via email. If you are concerned about your auction account, open a new Internet browser session and type in the company's correct Web address yourself. In any case, don't cut and paste the link from the message into your Internet browser; phishers often make links look like they go to one site, but actually send you somewhere else.
- Do not wire money to a seller's bank account unless you have independently verified who you are dealing with. If something goes wrong with the transaction, you will most likely lose your money because you'll have no way to get it back.
Pay with a Credit Card
If possible, make your online purchases with a credit card. This gives you more protection than cash or a check if you have a problem. Under federal law, if you pay by credit card you can question charges if the seller doesn't deliver what was promised and withhold payment on your credit card bill while the card company investigates the complaint.
Online Payment Services
Another payment alternative is to use an online payment service. With this type of payment service, you and the seller set up an account with the service. Buyers may be protected from unlawful use of their information because the online payment service holds the account information, not the seller. Many sellers prefer online payment services because the services tend to provide more security that the buyer's personal check won't bounce.
Keep Good Records
Good records include the seller's original listing, copies of emails and information received about the product. If you have a problem, you'll need these documents to complain or get a refund.
If You Have a Complaint
First, try to resolve it with the seller. If you're still not satisfied, contact the auction site. Depending on its policy, the site may investigate your complaint, bar the seller from future sales, refund your money, or allow you to post negative feedback about the seller.
If you suspect that the seller has committed fraud, file a report with your local consumer affairs office or law enforcement agency (look in the government blue pages in the phone book), as well as your state Attorney General. Also, send a copy of your complaint to the Internet Fraud Watch and the Federal Trade Commission.
AARP Resources
Online Shopping: A Safety Checklist Be safe, not sorry, when you shop online.
Online fraud is on the rise A real example on online fraud.
Wire Transfers are Scam Signs When someone urges you to wire money it is a red flag warning of a scam.
Identity Theft Guard yourself against identify theft.
Additional Resources
"Internet Auctions: A Guide for Buyers and Sellers" Learn how to buy or sell on online auction sites.
Report Internet Fraud Internet Crime Complaint Center - If you suspect Internet fraud was committed, file a complaint with the FBI and the National White Collar Crime Center.
Federal Trade Commission By reporting problems with online auctions, the Federal Trade Commission can take legal action.
Internet Fraud Watch You can also report Internet fraud to the National Consumer's League Internet Fraud Watch.
Books
Find these books online at Barnes & Noble.com
"eBay for Dummies", Marsha Collier (2006). Experts tell you how to buy and sell at online auctions.
"eBay the Smart Way: Selling: Buying and Profiting on the Web's No. 1 Auction Site," Joseph T. Sinclair, Amacom Publishers, 2003. A guide to smarter eBay tactics.
