Note that you also can't give it to another character once you've equipped it if it's Bind on Equip. Through the crafting merchant you can do a lot of upgrading and eventually swapping of items (you can upgrade a blue item to purple--though you have to be using the character who could normally equip the item--and then you can switch to another character and use the crafter to transform a purple item that character couldn't normally use into one he can), but you can't swap an item once it's bound.
So if you come across blues/purples that don't blow you away for your current character, I've found it's worth hanging onto/upgrading them without equipping them so I have a stash of purps to outfit a character I decide to start leveling.
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