Most online shoppers prefer to use credit cards when paying for purchases on the Internet. Corey Rudl, e-Business columnist for Entrepreneur.com and author of Insider Secrets to Marketing Your Business on the Internet, has called credit cards “the 900-pound gorilla of the online payment world.” However, on eBay and other online auction sites, many sellers are not set up to accept credit cards directly. Payments to them via credit card have to be made through online payment services such as PayPal, discussed later in this chapter.

Plastic Positives

There are three key reasons using a credit card can make good sense on eBay and other auction sites:

• Paying online with a credit card is almost as convenient and easy as paying in person at a retail store.

• A payment can be traced in the event a seller claims it was not received.

• Your credit card account may provide you with certain protections against fraudulent transactions.

Plastic Downsides

Despite plastic's popularity, many people remain nervous about using credit cards online. To pay an auction seller directly with plastic, you have to provide your credit card information to someone you've probably never met nor likely will ever see face-to-face.

There are at least two other potentially serious downsides. First, a credit card's monthly interest charges can quickly turn your auction “bargain” into a cash cow — for the financial institution that issued the card. To avoid these costs, you must pay off your credit card balance each month. Second, you must control your buying urges very carefully when paying with credit cards. If available credit is burning a hole in your pocket, as the old saying goes, you may be tempted to buy more items at auction or to bid higher amounts than you can realistically afford. Suddenly, you will find yourself owing thousands of dollars to a credit card company and having to make big monthly payments on a balance that will take years to pay off. To raise needed money, you might even have to auction off — and take a loss on — the items that put you into hock in the first place.