How to Avoid Bid Website Scams

The almighty penny! The penny is getting weaker in this economy and may be heading the way of the Dodo bird, but penny auction websites are booming and seem to be here to stay!

There are those who believe that penny auction sites are a legitimate way to buy various items at great discounts and then there are others that exclaim....SCAM!

In order to decide if they are scams or not, we need to discuss exactly what a penny auction site is and how it works.

A penny auction website is a site set up for people to auction or bid on different items of value. These items include, but are not limited to, electronics, small appliances, gift cards, clothing, and tools. This is a bidding fee auction site, meaning it costs money to place an actual bid, whether or not the auction is won or not.

The object of the penny auction site is to bid on items of value to try to win them.

An item is listed on the site, usually, for a starting price of $0 and a time limit is set for the sale of the item, a countdown timer keeps track of the time.

As the timer heads towards zero to indicate the auction is over, bidders then bid on the item, and as each bid is placed, the cost of the item goes by one penny for each bid placed. And, as each bid is placed the timer gets 15-20 seconds added on.

The bids keep coming and the timer keeps getting more time until there are no more bids and the timer hits zero.

Example auction:

An Xbox valued at $300 is up for auction and each bid cost $1 each.

The auction begins with the timer at 15 minutes and the price of the Xbox set at $0.

As the timer counts down to 10 seconds left, a bid comes in, raises the price of the Xbox to $.01 and cost the bidder $1. Timer gets another 15-20 seconds. Another bid comes in, and another and another. Each time raising the price of the Xbox by $.01 and costing the bidder $1.

This can go on and on for quite a while.

Finally, it ends. The timer hit zero, the auction has ended and the winner is announced.

John Smith won the Xbox at $150 and he won it using 50 bids,

The winner of the auction pays $150 for a brand new Xbox, plus $1 for each placed bid, let's say 50 bids for a total cost of $200 for a $300 item. Savings of $100.

The penny auction site made $200 from the winner and $14950 from the other 14950 bids for a total of $15150 for an Xbox that was valued at $300.

So, both the winner and the website are very happy from this auction.

BUT, the other bidders that placed a total of 14950 bids costing $1 each are out of luck!

There are many penny auction websites out there and they all work differently, but this is the basic idea.

Is this a scam?

If the bidders are aware of what the rules are and how the website auctions are operated, then no. In the above-used example, the website disclosed all information and every bidder is made fully aware how the auctions work. A perfectly legit site made over $15000 for a $300 item.

If the website does not explain how it is operating then, yes. Many sites do not disclose the proper information, and many are coming under investigation. Some claims are that the timer gets the extra 15-20 seconds automatically, through fake bids, placed by the website. This would falsely continue the auction to get more real bids.

Using a penny auction is ultimately up to you. If your choice is to try one, proceed with extreme caution. Thoroughly read all fine print and do your research before starting up. Each site works a little different, so observing auctions first, is always a good idea.

Also remember, just because you bid on an item, does not mean you will win it, BUT each bid you place is money spent!

Is the question scam or not a scam? Or is the actual question, is it fair to all parties involved?