BidFun, QuiBids and other penny-auction websites operate in the way they're described on the websites, but many people end up paying as much or more than they would if they purchased items at a retail store. Because these websites charge per bid, bidders can lose a significant amount of money.
Traditional auction websites, such as eBay, allow users to place bids for free. Because eBay itself isn't selling products, it makes money by charging a small commission on items sold. Penny-auction websites, on the other hand, sell their own items. Typically, these items start out selling at an incredible free price. However, each bid only raises the price of the item by 1 cent, and bidders have to pay significantly more than 1 cent to place a bid.
Consumer Reports and other organizations have warned people about penny-auction websites, but these websites do sometimes lose money on auctions if bidding activity is especially low. In addition, it only takes one bid to win an item, so lucky bidders can get great deals on some products. However, it's important to exercise caution before placing bids, as the profit that keeps penny-auction websites afloat comes from bidders who spend more on bids than what they receive in items won.
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