How do Penny Auctions Actually Work
Everyone has heard of the new “Penny Auction” craze that is sweeping the world currently, but not many people know exactly how they work. A lot of people think they are a scam and try to stay away from them because of the negative media attention that they have gotten, however, once you understand the actual system and how the system works it can really be a good way to save money on every day retail items.
What exactly is a Penny Auction Site?
An actual Penny Auction site is an auction site that auctions off products and goods just like any other auction out there. However, they do it with just a bit of a twist. First off, you have to “Buy” bids in order to participate in the auctions. Now, once you buy bids on the website you are normally able to use those Bids on ANY of the auctions that are on the site.
Now, unlike normal auction sites that the price of the auction raises by something like $10, $15, $25 or even $100 at a time, when you place a bid on a Penny auction website the value of the item only goes up by one penny, that’s right ONE CENT, this is the reason you see things like iPads going for incredibly low deals.
How one can actually save on a Penny Auction Website?
Well, as mentioned when you are bidding on a Penny Auction they act a lot like normal auctions, so a lot of big time auction people like to wait until most people have reached their limit and then they come in with their bids. If you do this in a Penny Auction website you can really turn a good profit.
For example, you have to pay $0.50 per bid at this particular auction website, let’s say that there are two people going for this item that retails at $25.00, let’s say you are watching the auction and two people are bidding and the auction goes to $1.00. Chances are, that neither of those bidders are going to keep going because they have already spent $25 in bids, so now if they keep going on this item they are going to end up paying more in bids than the actual item is worth, so you come in with one or two bids ($0.50 – $1.00) and win a $25.00 gift card, you just had made 24x your investment with just one or two bids.
Drawbacks to Penny Auction Sites
Now, with everything there is always a positive and a negative, in the example mentioned earlier, there are always people out there who wait until others have exhausted a lot of bids on an auction and jump in at the last minute, these people are referred to as “Jumpers” or “Snipers” in the Penny Auction industry.
Now, that is basically what you did in the example above in order to get a really good deal on your item, so you have to be aware that if you are battling with another bidder for an auction that this type of thing can happen to you as well, and you end up losing a lot of money bidding on an item that doesn’t go in your favor.
A special thanks goes out to FrogeeBidz.com, a Reserve Penny Auction site for providing us with the information that was required in order to bring you today’s article.