The recent bankruptcy filing of Northwest Territorial Mint is a stark reminder that there are risks associated with buying coins online. In fact, this is the fourth such incident over the past couple of years of a national online coin dealer filing for bankruptcy. We’ve highlighted other popular online dealers who have fallen by the wayside including Tulving, Merit and Bullion Direct. None of these dealers were fly-by-night companies. In fact, they had all been in business for a number of years prior to experiencing financial difficulties. Great deals can be found online (in fact, prospective customers regularly point them out to us); however, unless you do your due diligence, there’s no guarantee that you’ll receive your order; at least within a reasonable amount of time. While we’re not trying to dissuade you from buying coins online, you need to take extra precautions to increase the chances of a successful transaction. In this article, we’ll discuss some steps that you can take to protect yourself and will compare the benefits of purchasing locally as opposed to online.
If it Sounds Too Good to Be True…
If you occasionally search for coins online, you’ve probably been peppered with online coin advertisements for various types of coins. In some cases, the advertised items are well below market and seem too good to be true. In fact, as a coin dealer, we occasionally see coins and bullion advertised at prices that are below wholesale prices. This is usually a sign that something may not be on the up and up. While some of the online advertisers are good reputable companies, we’ve seen some recently established companies for which there is little information. Furthermore, many of these companies are using your funds to fill orders, which can result in long delivery delays. In fact, this is how many of the now defunct online coin dealers have gotten into trouble; using the funds of customers to fill previously placed orders. Think twice before falling prey to one of these potential schemes.
Know Who You’re Doing Business With
While avoiding deals that sound too good to be true is an important way to protect yourself, nothing beats knowing who you’re doing business with. Fortunately, in the age of the internet, there’s no shortage of information available on established companies. Better Business Bureau reviews and general searches on the company and principals of the organization can reveal a wealth of information. Conducting online searches of the owners of the companies may be as important, if not more important than searching for the company itself. Reason being is that the owner(s) may be shareholders in multiple companies and/or have had similar ventures in the past that have gone belly up. In fact, a recent customer brought to our attention that the owner of multiple coin businesses in Minnesota who sold his father overpriced numismatic coins has had multiple complaints filed against him. We have personally dealt with a coin dealer through one of our networks who unbeknownst to us, previously filed for bankruptcy and reopened under a different name. We assumed that he had been properly vetted, but nothing beats doing your own due diligence. Not surprisingly, this appears to be his second failed venture, as a new contact is listed on the company’s roster. It will be interesting to see if he makes a third attempt at starting a coin dealership.
As we mentioned above, not all coin dealers have the coins and/or bullion in stock that they’re selling to their customers. Therefore, it’s important to ask an online coin dealer if the product is live or on back order. Whenever possible, you should always purchase live product, as it should be shipped within a few days of placing your order. Dealers who don’t have live product shouldn’t necessarily be avoided, as demand on occasion far exceeds supply. Case in point was last July through September, when we had the perfect storm of the Shemitah, the Four Blood Moons and concerns of an imminent stock market collapse. We personally placed in excess of $500,000 worth of special orders for customers, but handle these transactions differently than some of our competitors. Rather than using our customers’ funds to purchase the items, we require a reasonable deposit merely to protect our interests. We believe that all coin dealers should take a similar approach, but unfortunately that’s not likely to happen anytime soon. If for some reason you’re not able to get a straight answer out of your coin dealer with respect to their current inventory, we suggest that you consider other options.
While it’s somewhat implied that live product should be shipped out in short order, it’s always important to verify the estimated shipping time and form of shipment. While you may not be preparing for the Day of Elul, like some of our customers were doing last year, you may still have specific deadlines that need to be met for one reason or another. Not to mention, there’s always a bit of anxiety when placing an order for a large ticket item (no matter what it is) until it arrives safely at its destination. We recommend that you also require a signature, as FedEx and UPS packages are oftentimes left on the porch of residences. Obviously, the last thing that you want is for a package containing thousands of dollars of valuables to sit out in the open; especially around the holidays where the number of thefts tend to increase.
Consider Dealing Locally
We have mentioned some of the above potential pitfalls and issues associated with buying coins online not as a means to dissuade you, but rather to make you aware of some of the exposures. Of course, one of the ways to avoid most, if not all of the above issues is by dealing with a local coin dealer. Most local coin dealers place a high emphasis on building relationships with customers, which means that they’re likely to steer you in the right direction; at least steer you away from making bad decisions. In time, you’ll build a rapport and trust that may be difficult, if not impossible to do with an online coin dealer. You’ll be able to check on inventory levels on a regular basis, and in most cases, take physical delivery of your coins or bullion at the time of the transaction. If you’re placing a special order, consider conducting business with a local coin dealer who will accept a deposit as opposed to requiring full payment in advance of placing an order. Additionally, local coin dealers can keep you apprised of new inventory that might be of interest to you. Loyalty also has its privileges in that you can expect to receive preferred pricing when conducting regular business with a local coin dealer. Last but not least, you may be provided with early access to new inventory, which can especially come in handy when the industry is experiencing shortages as we did last year.
In conclusion, when buying coins online, it’s important that you do your due diligence. If you happen to come across an online ad for a coin offering that appears to be too good to be true, then it probably is. Be sure to check the online dealer’s current standing with the Better Business Bureau and research the owners or principals to see if they’ve experienced any issues in the past. We also recommend that you verify the inventory status of the item that you’re purchasing, as well as the estimated shipping time and form of shipping. If the amount of due diligence we’ve suggested appears to be overwhelming, or if you’re the type of person that prefers face-to-face transactions, we recommend that you consider establishing a relationship with a local coin dealer. It’s still important to properly vet a local coin dealer, but there are many potential benefits in dealing locally, such as taking possession of the coins or bullion at the time of the transaction, having someone that will look out for your best interests, the possibility of discounted rates for regular business and early access to new inventory, just to name a few.