Online ads, often designed to look like news reports, are cropping up on popular websites claiming that you can get great deals on iPads and other electronics with online penny auctions. The discounts offered on penny auction sites are tempting, but the Better Business Bureau of Southern Arizona warns bargain hunters that they should stop and do their research before making their first bid.

“BBB has received hundreds of complaints from consumers about penny auctions so far this year and we’re encouraging online bargain hunters to do their research,” says Kim States, BBB President. “Unlike typical auctions, unsuccessfully bidding on an item through a penny auction will still cost you. BBB has heard from people who have lost hundreds of dollars bidding on items yet have nothing to show for it.”

Most commonly with a penny auction, users must set up an account and purchase bids with a credit or debit card; each individual bid may cost less than a dollar and are often sold in bundles of 100 or more. Every item has a countdown clock and as people bid, the cost of the item goes up incrementally and more time is added to the clock. Even if you don’t win the item, you still have to pay for the bids you placed which can add up over time.

Complaints filed against penny auction websites claim that some sites use phony bidders and “bots” to drive up the prices on items. Customer support is also a major concern as many complainants explain (more…)