"What ever it is, you can find it on eBay" is the catch phrase we've seen on eBay commercials and advertisements. EBay is similar to a 24/7 worldwide flea market. Since 1995, eBay has grown at an exponential rate and expanded their services to the world of commercial/residential real estate, automotive, computer/electronics, collectibles, and sporting goods. So how can you take advantage of eBay's phenomenal growth yet avoid being caught victim in an online fraud? Here are some tips to be aware of when trading on eBay.

Buyers are the ones who are most at risk of an online fraud. To assist in the combat against fraudulent transactions, eBay offers several tools.

1. Seller's feedback. One of the best ways to judge a seller's honesty is to check his or her feedback. Most buyers will rate their experience with a seller in the seller's feedback profile. Avoid sellers with profiles containing a high percentage of negative feedback. Scammers will also try to build a positive profile by doing several honest $5 - $10 transactions. Once their profile reaches a satisfying level, they will begin conducting higher priced fraudulent transactions.
2. Payment Methods. Credit cards represent the safest way to purchase anything online since most credit card companies will cover the cost of a fraudulent transaction. EBay recommends using an online payment service such as PayPal for increased protection. However, in order to be protected by PayPal, users must follow their stringent rules when selling and buying.
3. Escrow Service. If you're planning on purchasing a high priced item, typically over $500, consider using an escrow service. An escrow service acts as a middleman between the buyer and the seller to ensure a fair transaction. The escrow service holds the item and the money until the buyer has inspected and approved the goods. Only then does it release the money to the seller. The only eBay approved escrow service is www.escrow.com. Use caution if a seller suggests using other escrow service as it may be fraudulent.

Although buyers are most vulnerable to frauds, sellers are not immune to these threats. If you're selling on eBay, make sure you follow all of the rules, one of the most important of which is to never ship any item to a non-confirmed address.

For example, a scammer might portray himself as an 80-year old woman living in the U.S. "She" wants to buy the used fileserver you have listed on eBay as a graduation gift for her grandson living in Romania . Since she is not physically able to ship the server on her own, she asks you to ship it directly to her grandson and attach a Congrats Card from her. After you agreed to her terms, she sent you a payment for $2000 through PayPal. Since you received the money, you went to the U.S post office and shipped the item. The buyer did not want to pay more for shipping than necessary and declined your offer of a tracking number. About four days after the server had been shipped PayPal notified you that it had reversed the transaction and credited the buyer's account for $2,000. You immediately went to the Post Office to stop the shipment, but they could not do anything about it because the package had already left the country.

In the above example you went out of your way to help an elderly woman looking after her grandson and ended up regretting it. The first mistake was shipping the item to a non-confirmed address. PayPal reversed the transaction because the buyer filed a complaint that he never received the shipment at his confirmed address. The second mistake was your failure to purchase a tracking number for the package. While it may not have helped in this case (merely confirming for the buyer that you shipped the item to a bad address) a tracking number confirms shipment and receipt. Perhaps the third mistake was going out of your way to forge a nice graduation card. As if it wasn't bad enough to simply steal your money, they had you waste additional time securing a lovely graduation card to send with the package for which you'll never be paid.

Unfortunately the above example is a true story. The best way to be protected by eBay and PayPal is to follow their trading rules. And have folks send their own cards.