Penny Auctions Can Cost You Much More

Posted by:
Barbara Anthony, Undersecretary of the Office of Consumer Affairs and Business Regulation

 

 

The $999 MacBook for $53.73, the $500 iPad for $2.83, and the $400 PlayStation 3 for $8.40 are all unbelievable deals. But getting that kind of bargain might not be all it’s cracked up to be.

Growing in popularity, “penny auction” Websites like skoreit.com, quibids.com, and beezid.com offer a wide variety of items, from computers and video games, to golf clubs, to gift cards from popular retailers. The winning bids are often tiny fractions of the actual retail price. (For an example of a bid seen on Nov. 30 at QuiBids, see the photo to the right.)

But penny auctions can also be fraught with consumer peril. The rules vary from site to site, and losing out on an item can be an expensive proposition.

Basically, in penny auctions a participant buys a pack of bids to use on an item or various items. The bids cost 60 cents or more, depending on the site. During the auction, the price of an item increases by one cent every time a bid is made. The countdown clock resets a number of seconds when a bid is made. When time runs out and no more bids are made, the last, highest bid is the winner. Unlike a regular auction where you may pay an entrance fee but do not pay per bid and do not lose money on your bid price, you do not get your bids or the cost of your bids back in a penny auction (although may direct costs to buying the item at retail price in many cases).

Consumers who are interested in using penny-auction Websites for holiday shopping should take some time to get acquainted with the process and the rules at a particular site. A few things to watch for:

• What is the site’s reputation? Do an Internet search for the site and see what other users are saying about it. Also, check with the Better Business Bureau, which has information on many of these sites.
• How much do bids cost? Some sites charge a flat fee, others reduce the per-bid cost when you buy in bulk.
• What happens if you don’t win the auction? Some sites allow you to purchase the item, using the cost of your bids to pay a portion of the retail price. Some offer no refund or other chance to use those bids.
• Are you looking for a bargain, or a good price on a particular item? Just surfing for a great bargain can leave you burning through bids with no real desire to buy the item at full price. Go into the auction deciding to the buy item at full price if you lose.
• Is this what you really want? In some cases, such as computers, the information available might not tell you if the item provides what you need. Not all laptops are built the same and not all cameras offer the same features.
• Is that “retail price” legitimate – and a bargain? Check around and make sure the listed “buy it now” price is not inflated. Also, shop around and see if the item you are trying to find is discounted somewhere else.
• Are you being charged appropriately? At most sites, you need to buy bids with a credit or debit card. There have been some complaints that some hidden or very poorly-disclosed fees ended up on consumers’ credit cards. Keep an eye on your statement to make sure you aren’t being charged more than you expected.

Penny auctions are becoming more popular and drawing more potential users, but they can create pitfalls for consumers who are not careful. Before jumping into a penny auction, consumers should make sure they are fully educated, aware of the rules, and know the potential downside of participating in such an auction.

Comments

[Roy Slater]

I've seen ads for these online penny auctions, but I've never tried using one. My wife's uncle said that he bought a camera for pretty cheap, but I'm not sure what the discount actually was after he bought all of his bids. Has anyone else had success with these?

[Kathleen Mizrahi]

thank you for this sort.. It gives facts about how penny auctions really work..

[Dianne Llanos]

thank you for the information It really helped a lot,..

[bidrack auctions]

Thanks for creating a sweet able & popular blog.

[Duane Fisher]

I have to call 888-716-1621, My step son used my credit card to purchase bids on priceshuffle.com. I complained with the scam artists and they stay to the policy and there rights to charge a minor $149.75 for 'bids' on fictitious items you will not receive. the web site is now not doing any business so you have to call them at 888-716-1621 anad they will just hang up on you. I will continue to call in hopes that they will get the message...

[T.P. Austin]

I read this as a beezid.com ad came on. It was quite ironic. Very good post with lots of helpful information. Your'e doing a great job!

[Rob Jenkins]

So funny I just heard a commercial on the radio for beezid.com where they are hyping up Ipads for 10 bucks etc. I really hope this type of marketing isnt fooling people any more, but sadly I know it must be effective or they would not do it.

[Maria]

I lost $200 for these auction website:priceshuffle.com. All these website is doing fradulent business practice against poor people. They shows a fake advertisement on internet ad and drag you into the fake auction which you never win and steal money. My credit company couldn't stop them to take money from my credit card even though I told them not to pay. priceshuffle.com does not have a proper address, only 1-888-0000 number and withdraw my money from some place else.
My advice is do not go to these website and save money!!!

[Josh]

Thanks for your post on penny auctions.

You've summarized the situation quite well - as penny auctions become more and more popular, there are a variety of rules/details that consumers need to be aware of before they participate. Not only that, but some penny auction sites even use fraudulent methods to drive up their prices.

In late 2009, I started a directory of safe penny auctions to help protect other consumers like myself. Only penny auctions that meet a strict criteria are featured over at the Penny Auction List - http://pennyauctionlist.com - Our site also provides tips and advice for new bidders.

Josh