A great way to lure people in. The consumer then places small bids usually the price goes up by one or two cents on the item. Each time someone bids the auction extends, but when the clock runs out and there's been no further bidding to extend it, the last bidder wins and pays the final — seemingly cheap — price.
In practice, auctions for popular items like iPads can go on for days, weeks or even months, creeping up cent by cent. And with each cent, someone is losing money — in essence the super-cheap deal at the end is subsidised by those who don't win the item after all. Add to that the time you have to spend on the computer, just hoping you are online at the right time.
The trouble is there is no right time, because there are plenty of those willing to give up a night or two of sleep for the ultimate prize of a cheap gadget.
And some global sites run the same auction for all their worldwide customers, meaning one wannabe purchaser's night-time is another's day. In at least one case we noticed, although the website had local domain names, they were just different interfaces for the same international auction. So you may think you're just bidding against other Australians, but people around the world have their eye on that iPad too.
Some sites don't even bother to convert currencies between Canadian, Australian, and New Zealand dollars, despite a marked real-world difference — suggesting that the actual price paid for the auction item is a negligible portion of the website's earnings. US magazine Time has likened participating in these auctions to doing drugs. In recessionary times, it's like heroin that will also save puppies.
And these sites work hard to get you hooked. The flashing signs, urgent countdown timers and testimonials from successful auction-winners are very tempting. One of the sites, QuiBids , demonstratively parades some of their winners on their front page. But what does the fine print say about these windfalls?
Prices do not include the cost of bids. You're outlaying something valuable — money — hoping to win something valuable, like an iPad. Dr Mark Griffiths, a professor of gambling studies at Nottingham Trent University in the UK, agrees and believes there is a large element of chance involved in one-cent auctions.
He outlined several parallels between these websites and gambling, and believes regulators need to intervene. If there is no real skill and it is essentially a chance activity, how is this not a form of gambling? But to bid I had to buy points, and the more you buy the cheaper they are.
After I spent it all I thought, 'Well I've been bidding on this for a long time, I've got to be close. Time lags: Many complaints about penny auctions involved late shipments, no shipments or shipments of products that aren't the same quality as advertised. Misleading Language: Terms like "bonus bids" might suggest that bids are free, but really aren't.
Hidden costs : In addition to bidding costs, many penny auction sites charge fees for membership, ongoing subscriptions or shipping. The FTC found that terms and conditions are often difficult to find on the websites.
In our research, On Your Side also discovered evidence that penny auction sites are targeting seniors via search engine optimization with special pages tagged "seniors-seniors-elderly" and "elderly-seniors.
Given the potential pitfalls, penny auction sites leave a lot to be desired as honest options for smart shoppers: for every "winner" there are multiple "losers. Our recommendation — be cautious, keep track of your real expenses and have a good time Also of interest: A survey con can cost you big. Note: We are currently in the process of replacing our commenting service, so it may take a few days for previous comments to appear. Login or register on AARP.
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