Submissions are now being accepted until Monday, August 10, having been extended from the original July 27 deadline.
The town council's events working party will judge the designs before the winners are announced on Wednesday, August 12.
Councillors decided to organise the competition in light of numerous events around the town being cancelled as a result of the coronavirus pandemic.
Deputy mayor Councillor Sarah Barlow, who represents Castle ward, proposed the idea at a meeting before it was agreed on by fellow councillors.
Participants should put their scarecrow, which can be made using materials from home on a theme of their choice, in the front garden to allow passers-by to view.
Residents can then email a photograph of their entry to the council for a chance to win £50 for first place.
A prize of £25 will be given to second place, and third place will receive £15.
A second category is also available for people without a garden, who can submit a picture or piece of artwork depicting a scarecrow to display in a window.
For category two, first prize will be £20, with £10 for second place and £5 for third.
Participants should confirm whether their names and photographs can be displayed on social media when emailing them to email@example.com for judging.