Penny Auctions: Too Good to Be True
Imagine being able to win a new television set for less than 10% of the retail price just by outbidding other people online in one cent increments. If this sounds like there is a catch, there is. A big catch. The winner of the auction pays the final price that he or she bid, but each bid costs between $0.50 and $1.00 per penny bid. Each bid is non-refundable, so a bidder may spend a good deal of money bidding for a product that they never win. Further, new bids increase the time of an auction by 15 to 30 seconds, so a last minute bidding war can extend an auction by several hours past its original deadline.
Although there are a few good deals to be had with less popular auctions, many penny auction sites also have hidden traps. According to the FTC, some penny auction sites use automated computer scripts (bots and shills) to drive up the price of auctions automatically to prevent any good deals. Some sites are phishing sites that steal financial information. According to the Better Business Bureau, there are also numerous hidden costs. One such scheme involved bonus “free” offers that end up costing money.
Consumer Reports offers useful tips on how to use penny bidding sites without getting ripped off. First, verify that the penny bidding site is legitimate through user reviews and complaints to the Better Business Bureau. Next, make sure that the site allows unlimited refunds of purchased bids and allows placed bids to be used towards a purchase of the item, commonly known as a “buy it now” option. Finally, be prepared to lose the amounts that you have placed in bids. Or better yet, watch for sales online and in stores through deal hunting web sites like FatWallet and Slickdeals!