But I can see how it is annoying that you have to pay first before you know whether you win an item. They should change that some how. Maybe auctioning is not the right format for a psuedo-virtual currency.
http://en.wikipedia.org/wiki/Proxy_bid
In a normal situation that would not matter because you would hold on to your money. In a pre-pay system this is total nonsense because you are paying first to pre-pay for your account (on the one item that you may be interested in) and afterwards you bid using your credits. Because of the two stage nature of the process there is now a ratchet, you've already paid your money, now you find that it was useless.
Major design flaw.
The bidding is normally decoupled from the actual payment, by moving the payment up-front the whole thing breaks.
Simply do a pre-auth on the card for the amount and charge when the buyer wins the auction ? Customer satisfaction guaranteed, 0 refunds and a lot less people like me that will get confused and / or pissed off.