HOW IT WORKS: Unlike a traditional auction, customers have to pay upfront to participate in an online penny auction. Each bid may cost anywhere from 25 cents to a $1. The price of the item starts at $0 and goes up by a penny every time a user places a bid.
THE RISK: If you don't win an auction item, you're still out the money you spent to place bids. That means you could spend money and have nothing to show for it.
OTHER PROBLEMS: Although there are some legitimate sites, the Better Business Bureau reports a high volume of complaints about the industry. Among the common complaints: customers said they were automatically charged fees or couldn't reach customer service representatives.