Be Wary of Penny Auctions

Listen to this television commercial, "Imagine getting a new Apple iPad today for just $23.74."

This ad for the penny auction site QuiBids and this one for Happy Bid Day make it look easy to get expensive items for just a few dollars.

The commercial claims, "Imagine paying $8.72 for a laptop computer."

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

Here he's on QuiBids seeing what it takes to win a $600 Samsung tablet.

Anthony explains, "I'm now the highest bidder."

But as the auction clock approaches zero, he's getting a lot of competition.

Anthony relays, "We have a big bidding war here."

As Anthony explains, "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."

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.

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

Anthony says, "One way penny auction sites typically suck you in is by adding seconds to the clock after every bid."

So with auctions for popular items like electronics, bidders keep jumping back in hoping to win.

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

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

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

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."

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