¡¡An FBI study completed in August 2000 found that online auctions ranked as the No. 1 source of fraud on the Internet. The Federal Trade Commission reports that the number of complaints the agency has received about online auctions jumped from 107 in 1997 to 10,700 in 1999. One of the most popular online auction sites, eBay, claims that approximately one out of every 40,000 of its listings is a confirmed case of fraud.

Here's some advice on how you can protect yourself when bidding online.

¡¡ Find out how the auction works. Each online auction operates a little differently. Some auction sites -- such as eBay and Amazon.com -- verify user IDs, insure sales, and prevent shilling (in which sellers or their friends bid on an item to drive up the price). Some auction sites don't. Read the rules and instructions on each auction site before you bid. Also, learn the difference between reserve auctions, Dutch auctions, proxy bidding, and so on, and find out which type of auction you're participating in.

¡¡ Do your homework. Know exactly what you're bidding on. Find out its worth and whether or not it comes with a warranty, the seller's return policy, whether there are shipping charges, and the terms and conditions of the sale. Get a definite delivery date and ask the seller to insure the shipment. Print out and keep item descriptions and photos to document any claims the seller made.¡¡

¡¡ Check out the seller. Many auction sites have feedback sections where buyers can offer reviews of the site's regular sellers. Find out what other buyers have to say about the seller. Don't buy from someone with a bad track record. Also, keep in mind that glowing recommendations can be false, having been planted by the seller or his friends. ¡¡

¡¡ Get contact information. Having the name, street address, and phone number of the seller can make it a lot easier to check up on that seller or follow up if there are problems. Don't deal with a seller who won't give you that information. Also, be cautious of addresses with PO boxes, and remember that many private shipping businesses will provide mailboxes that appear to have regular street addresses but are really just PO box equivalents.

¡¡ Be wary of certain sales. Be careful when bidding on expensive collectibles. Remember that you won't be able to examine them or have them appraised until after you've already paid for and received them. Also use caution when dealing with sellers who are private individuals or in a foreign country. Many consumer protection laws don't apply to private sales or foreign sellers.

Use a credit card. Paying with a credit card actually protects both the buyer and the seller. Buyers can dispute charges if an item is never delivered, and sellers don't have to worry about receiving bad checks. Make sure you read the terms of your credit card before using it on an auction site, however. Some auction sites handle credit card charges as cash advances rather than as purchases, which may limit your right to dispute charges.

Think about insurance. Many auction sites, including eBay and Amazon.com, insure buyers for up to a certain amount of money in case something goes wrong. Other sites may offer links to third-party insurance providers that will insure an online sale for a fee.¡¡

Consider using an escrow service. An escrow service can hold a buyer's payment and then forward it to the seller when the buyer receives the item. Escrow services protect the buyer and the seller. Although there's a small fee, sellers may find escrow services to be cheaper than using credit cards.

¡T Report fraud. If you get conned, don't just take it. Let the auction site and law enforcement agents know. The seller may be conning other buyers, and that person can't be stopped if no one knows what she's doing.¡¡

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