How to Use an Escrow Service to Pay for eBay Items

Even though most sales on eBay are for items that cost $100 or less, using an escrow service comes in handy on occasion — such as when you buy a big-ticket item or something extremely rare. Escrow is a service that allows a buyer and seller to protect a transaction by placing the money in the hands of a neutral third party until a specified set of conditions are met.

Sellers note in their item descriptions whether they're willing to accept escrow. If you're nervous about sending a lot of money to someone you don't really know (like a user named Clumsy who has only two feedback comments and is shipping you bone china from Broken Hill, Australia), consider using an escrow company.

Using an escrow company is worthwhile only if the item you're bidding on is expensive, rare, fragile, or traveling a long distance. If you're spending less than $300 for the item, purchase insurance from your shipper instead — just in case.

eBay has a partnership with Escrow.com to handle eBay escrow sales in Canada and the United States. After a transaction closes, the buyer sends the payment to the escrow company. After the escrow company receives the money, it e-mails the seller to ship the merchandise. After the buyer receives the item, he or she has an agreed-on period of time to look it over.

If everything's okay, the escrow service sends the payment to the seller. If the buyer is unhappy with the item, he or she must ship it back to the seller. When the escrow service receives word from the seller that the item has been returned, the service returns the payment to the buyer (minus the escrow company's handling fee, of course).

Before you start an escrow transaction, make sure that you and the seller agree on these terms (use e-mail to sort it out). Here are three questions about escrow that you should know the answers to before you bid:

  • Who pays the escrow fee? (Normally, the buyer does, though sometimes the buyer and seller split the cost.)

  • How long is the inspection period? (Routinely, it's two business days after receipt of the merchandise.)

  • Who pays for return shipping if the item is rejected? (The buyer usually pays.)

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