Penny Auctions Offer Great Deals, But Can Be Risky

Move over eBay, there's a new auction in town, and you can get in on the action for only a penny. CBS 2's Dorothy Tucker takes a look at penny auctions -- which can be bargain bonanza for some, and bad news for others.

No coupons, no rebates, Holly McDowell won it all on a website called QuiBids.com. It's just one of dozens of sites where you compete to be the highest bidder.

McDowell says she bought $400 golf clubs for about $6.50.

"It's almost like playing a slot machine," she said.

But instead of feeding quarters, you're clicking a mouse. Each bid is recorded as one penny, but in reality you're paying more because you have to buy the bids. On QuiBids, every bid costs 60 cents.

Stuart Kruse has won $800 worth of merchandise, spending only $300, which means he controls his bidding.

"I think it's a good way to get something less expensive than you would get it at the store," said Kruse.

But we found others, like one bidder who must have lost control because he bid $2,500 for a video game that was worth only $60.

Here's how it works: just when you think you're about to win, another bidder jumps in. So the clock restarts and the price keeps rising. Experts say it can be addictive.

"The problem occurs when you cross the line," said expert Celeste Napier. "When you're now spending the money that you really should be using for other things."

And remember, there's only one winner.

A Minneapolis expert said, "So for every winner, there are a lot of suckers: people who didn't win."

Bidding on items you don't win can add up.

To decrease his losses and increase his chances of winning, Stuart Kruse does a little homework. Before he bids on an item, he checks to see how much it sold for the last time it was auctioned off.

"So your $10 gift card might go for $1, so I might start entering at 80 cents or 75 cents," he said.

As a first-time bidder, CBS 2's Dorothy Tucker got lucky. She won a coffee maker, sold to her for 52 cents. She also won five gift cards for a few pennies.

But remember, each penny bid has a 60-cent charge. In the end, she made 46 bids on items she won and lost. Plus, she had to pay for shipping. Bottom line, she won $84.55 worth of merchandise, and it cost her $47.90. So with the penny auction, she ended up saving $36.65.

It's easy to get caught up in the auction. But sites like QuiBids help you maintain some control by limiting the number of times you can win in a day, week or month. For instance, after winning eight bids, you can't play for another a month.