Consumer Reports Reviews Penny Auctions

PITTSBURGH (KDKA) -- Penny auction websites advertise big bargains with the lucky winners walking off with televisions, small kitchen appliances and other items for a fraction of their retail cost.

Prices can start as low as zero and each bid increases the price only a penny or two, so the deals look amazing. Consumer Reports looked closely at this growing new industry.

Ads for the penny auction sites QuiBids and Happy Bid Day make it look easy to get expensive items for just a few dollars.

Consumer Reports Anthony Giorgianni checked out these and other penny auction sites.

Here he went on QuiBids to see what it takes to win a $600 Samsung tablet.

"I'm now the highest bidder," Giorgianni said.

But as the auction clock approached zero, he got a lot of competition.

"We have a big bidding war here," he said.

"The sites can make a lot of money when there's a bidding war because they charge you every time you bid. A typical bid costs 50 cents to a dollar and the site keeps your money whether you win or lose," Giorgianni added.

So if the winning price is $100 and each bid costs 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 and says you can get caught up in the game and lose your head.

"I once spent $200 in bids to win a $50 gift card and I didn't even win it," she said.

"One way penny auction 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.

"I've won a few good deals on penny auction sites, but there's other times where I've lost a lot," Lee said.

And Amanda says she once lost more than $300 when a now-defunct site didn't send her the items she had won.

"Our advice: Buyer beware. Though you might get a good deal, you might also lose a lot of money," Giorgianni said.

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 the unprofitable auctions."

With QuiBids and some of the other sites, if you don't win, you can apply some or all the money you've spent bidding toward buying the item at the site's full price.

But, Consumer Reports says that may not be a good deal since frequently you could find the item for less from a regular retailer. You can read more from Consumer Reports about penny auctions by visiting: ConsumerReports.org.

RELATED LINKS
More Local News
More Consumer Reports