More than half of British adults are profiting by selling goods online, with the average vendor making £341 in the past 12 months, according to Orange Broadband.

Online trading is not without risks, however. The number of internet shoppers making a formal complaint about being ripped off jumped 74% to 3,775 between 2004 and 2005, according to the European Consumer Centre (ECC).

That’s still a small figure but the increasing number of people selling as well as buying over the net is concerning the ECC, which found trading on auction websites such as Ebay increased the likelihood of running into trouble compared with using online retailers.

The surge in internet buying and selling has prompted the European Union to launch a website — dolceta.eu — giving information on consumer rights when buying from overseas and online retailers.

The site offers advice on everything from buying from a British retailer — including how long you have to change your mind about a purchase — to settling disputes with overseas companies that fail to send goods ordered over the net.

It also covers a range of financial issues such as running a family budget and getting the best mortgage deal.

One of the best tips for those making online purchases of between £100 and £30,000 is to use a credit card, rather than a debit or charge card.

Thanks to a recent ruling, people who use their credit card to pay overseas companies for goods or services that fail to arrive or prove unsatisfactory can now claim a refund from their card provider.

The right is based on section 75 of the Consumer Credit Act, under which card firms and retailers are “jointly and severally liable” for any losses sustained as a result of credit-card purchases — as long as the value of the goods or services is between £100 and £30,000.

Consumer groups have welcomed the decision to open up this protection to people who use their cards overseas, or to pay foreign firms over the internet — rather than just those shopping in Britain.

Mike Naylor of Which, the consumer lobbyist, said: “It is great that consumers are now officially covered wherever the card is used.”

If you want to make a claim under section 75, however, you must first prove a breach of contract or misrepresentation occurred and that compensation is justified.

This is relatively simple where the retailer has gone out of business, but it can become more complicated if it denies liability or disputes the amount claimed. It is therefore a good idea to keep receipts and correspondence.

How you pay is also important when using online auction sites. Ebay encourages members to use its Paypal payment system, which involves setting up a Paypal account that can send and receive electronic transfers to and from other users.

The system hides members’ financial information and also offers compensation of up to £500 for buyers and sellers who lose out.

However, consumer groups point out that those buying higher-value goods will still be left vulnerable.

Ruth Bamford of Citizens Advice, which is part of the ECC, said: “Ebay users get some extra protection if they use Paypal, although it doesn’t offer complete security.”

For those not using Paypal, she recommends avoiding any transactions where you are asked to send money via a Western Union money transfer.

Bamford said: “One scam that we’ve recently become aware of involves bidders who lose out being contacted by fraudsters posing as sellers with a similar item. They generally request payment through Western Union, so we would advise people to be extremely cautious if they are asked to pay using this method.”

As well as improving the Paypal system, Ebay has tried to help auction bidders identify honest buyers and sellers by introducing a feedback system under which users can rate each other.

However, an Ebay executive recently admitted that members “need to be streetwise” because there will always be a risk of fraud when taking part in online auctions, causing critics to accuse management of taking a “laissez-faire” approach.

Peter Anderson, an engineer from Tollesbury in Essex, has personal experience of how the Ebay feedback system can fail to weed out fraudsters.

He has been buying and selling on Ebay for about three years, but was recently taken in by a seller who had earned a good record before ripping people off.

Anderson, 52, said: “This particular seller had spent several months building up a 100% feedback score. It would appear that he then sold a lot of goods that never arrived within a few weeks, before disappearing.

“I lost only £28, but it was quite annoying and I haven’t had any joy from Ebay itself because I paid via a direct bank transfer.”

Other users complain that giving someone who lets you down negative feedback usually means that they give you a low score in return.