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How does penny auction work? Imagine your friend is auctioning off his entire collection of signed Beatles records. He calls for a garage auction except in this case he mentions that each time you or any one for that matter bids, he has to place 1 dollar in a box. That means each of your bid will cost you 1 dollar. At the end the last man standing will win the item. Imagine you being the lucky winner and the final price have been $500, which means there were 500 bids on the item. If you had placed bid 50 times then your final price will be $50 + $500; $550.

A lot of auctioneer nowadays does this kind of auctioneering which ensures that he makes a profit not only by selling the article at the highest possible price but also makes a reasonable profit by charging for each bid that he receives on the products. This form of auction has grown popular among the online buyers as they sometimes get access to great products at a hugely discounted price.

However there is a huge downside in all this. Certain auction websites are known to artificially increase the price of their products by employing penny auction software and also human beings who simply sit and bid on the products to artificially inflate their final cost. At the same time each bid by a legitimate buyer also costs him money. So the site owner continues to earn so long as legitimate buyers participate in the bidding process. At the end the site simply lets a legitimate buyer win the auction to make it all appear legitimate and fair. The buyer looses money in making bids as well as buying the product at a price much higher than what he ought to be bought it for.

Your final price after the bidding process would be, if you are lucky to win the auction, the final price of the product, the cost of the bids that you have already placed and any shipping & handling charges associated with the delivery of the product to you.

Penny auction sites mostly ship the products directly from the suppliers and at times they have no control on the time frame within which the product gets delivered. Most sites would however a tentative date of delivery mentioned for products owned in auction however as mentioned above it is not always maintained diligently. Sometimes the sites would send out notifications about the product being dispatched and a tracking number that you can track on the shipping company’s website.

Sometimes such penny auction sites also dupe their buyers by not even sending the products that the buyers pay for. With the availability of penny auction script and programs, penny auction sites are mushrooming like anything these days. Some of them are very fishy businesses who adopt illegitimate purposes and try to dupe the bargain hunting buyers. Buyers have to be extra careful when transacting business on these sites and also ensure to do their research before starting their bidding operations.

Online credit card fraud is also a major risk and if you are unlucky enough to have done business on any of these fraud sites you put yourself in the risk of getting your self defrauded.