If you’ve spent any time on the internet, you’ve probably seen a few ads showing electronics for extremely low prices. You know, the iPad that’s selling for $29, digital cameras for $19 or HD TVs for $89. No, there hasn’t been mass deflation or a flashback to prices of 1955. These items are a part of sites called penny auctions, which are becoming more and more popular, especially as new auction sites pop up each month.
Before you’re lured into signing up for one of these penny auction sites, there are a few things you should know about how they work. If you’re not careful, you can end up regretting that you ever clicked on those sites.
How Penny Auctions Work
In order to bid on an item, you must first register with the site. This may sound simple enough, but with so many penny auction sites out there, you may sign up for a site that isn’t reputable. The last thing you want is to give out your information to a penny auction site that isn’t legitimate.
Once you have an account, you can purchase bids. But, it’s not the same as listing items on eBay and bidding for things. The auction site itself lists each item and you increase the price by a penny with each one of your bids. The catch is that you purchase these bids from the site, which can average from $0.75 to $1.00 or more per bid. Many sites will sell bids in packages, so you’ll purchase anywhere from 10 to 100 bids at a time.
After you bid, the price of the item will go up by a penny and the countdown clock will add 15 seconds or so to the clock. That’s right, even though the clock looks like the auction is over in a minute, it really depends if another bid comes in or not. If another bid is made, the clock will add 15 seconds or so, and the auction will keep going.
Finally, the auction clock reaches 0:00. The winning bid gets the option to purchase the item at the winning auction price. If an iPad auction ends at $29, you get the option to purchase it at $29. But remember, all those bids you made should be considered if you win. If you bid 100 times, your total investment is $129.
Sounds pretty good huh? Yes, for those who win. But the chances are very low and there are a lot of losers for every auction. If you didn’t win the auction, all your bids are gone. That means if you bid 100 times for the iPad and did not win, you just threw $100 out the window.
The House Always Wins
Some would argue that penny auctions are a lot like gambling. What I know for sure is that the house almost always wins on these auctions – and they usually win big.
Let’s look at that $29 iPad example. If each bid costs $0.01, the total number of bids would be equal to 2900. At $1.00 per bid, the auction site has cleared a cool $2,900 for a $499 iPad. They aren’t giving away anything for $29, that’s for sure!
Before you Bid…
Understand that these sites can be addicting. There are hundreds of penny auctions sites out there because thousands of people are addicted to refreshing their screen and bidding up items all day. I’ve read and watched stories of people who would sit for hours bidding on items. It creates a rush similar to that of gambling and the countdown clock just ads to the appeal of winning an auction.
If you do want to try out a penny auction site, please do your research. Don’t sign up for the first one you see. I hope you don’t sign up for any period, but that’s just my opinion. I personally don’t use penny auction sites because I don’t have time or money to waste. With the popularity of penny sites growing each month, I thought it was worth writing about in case someone ran across an auction site.
What are your thoughts? Have you ever tried a penny auction? Would you consider it to be gambling? Meet us in the comments!