They promise deep discounts, but you rarely win. By Jessica L. Anderson, Associate Editor June 3, 2011 In for a penny, in for a pound, goes the saying. That's certainly true with penny auctions. The sites, springing up all over the Web, auction off products from iPads to gift cards, supposedly at discounts up to 99%. Sound too good to be true? You're right.Here's how it works: The auction price for every item starts at $0, and each bid increases the price by a penny. But you have to pay to bid. Participants in penny auctions register with the site and buy bids that typically range in price from 50 cents to $1 each. Each time you bid, you spend real money, for the chance to be the high bidder. If you win, your cost is the closing price, plus the price of the bids. In a recent auction on QuiBids.com, a user won an Apple iMac, valued at $1,700, for just $10.79. But the winner had bid 101 times, so the cost was really $71.39. Still, not bad, right? But you could also end up paying more than an item is worth. A 16GB Apple iPad 2 recently sold at Beezid.com for $158.59 -- a steal given the $499 retail price. But the winner had placed 878 bids, at a cost of $412.66. Final price: $571.25. Time limits on penny auctions are extended with each new bid as the countdown approaches zero -- so the auction can go on and on. Even when you think you've won, another bid comes in and the auction continues. Auctions eventually end with a winner, but "the majority of people don't ever win a product," says Better Business Bureau spokeswoman Becky Maier. Some sites, such as QuiBids and BidZillion.com, allow you to put your losing bids toward buying the item at the retail price. But some shopping may well turn up a better price elsewhere.