SAN ANTONIO – Penny auction websites advertise great bargains, but Consumer Reports says bidder beware.
While bidders may walk away with a electronics or appliances at a fraction of retail, they may also lose plenty of money.
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Prices on penny auction sites can start as low as zero, and each bid increases the price only by a penny or two. Ads for sites including QuiBids and Happy Bid Day make it look easy to win expensive items like an iPad for $23.74 or a laptop for $8.82.
Consumer Reports checked out these and other penny auction sites. As the clock ticks toward zero on an auction, Consumer Reports' Anthony Giorgianni found competition can get intense.
"The sites can make a lot of money when there's a bidding war because they charge you every time you bid." he said. "A typical bid costs 50 cents to a dollar, and the site keeps your money whether you win or lose."
So, if he winning price is $100, and each bid is 50 cents, the site could bring in as much as $5,000.
Amanda Lee founded a website called Penny Auction Watch after she had some bad experiences bidding. She found bidders can get caught up in the game.
"I once spent $200 in bids to win a $50 gift card, and I didn't even win it," Lee said.
Lee said she has won a few good deals on penny auction sites, but other times she lost a lot. She said she once lost $300 when a now-defunct site didn't send the items she has won.
"One way penny auctions sites typically suck you in is by adding seconds to the clock after every bid," Giorgianni said.
So with auctions for popular items like electronics, bidders keep jumping back in hoping to win.
QuiBids told Consumer Reports it loses money on about half of its auctions and that much of the profit from profitable auctions goes toward covering the losses from unprofitable auctions.
With QuiBids and some other sites, if you don't win, you can apply some or all of the money you've spent bidding toward buying the item at the site's full price. However, consumers can often find the item for less at a regular retailer.
To read more: www.consumerreports.org/pennyauctions.