Penny Auctions: A Great Deal or a Scam?

Posted by Amanda on November 10, 2010

Are penny auctions scams? When electronics can be so expensive, even if you aren’t spending $25,000 on a projection TV, you’ll still want to find a way to save money on your purchases. And if you are the type of consumer who hunts after the latest technology as soon as it comes out on the market, you’ll be even more enticed to check out a deal.

Advertisements offering the newest gaming consoles, DVD players, digital cameras, etc. for 1₵ that pop up in your email or on sites may sound extra tempting, but as with any extremely tempting deal, you need to do the research and understand what is involved. Let’s take a look at how Penny Auctions work and see if they are worth your time and money.

What is a Penny Auction?

According to Wikipedia, “a penny auction is a type of auction in which participants must pay a non-refundable fee to place a small incremental bid. When time expires, the last participant to have placed a bid wins the item and also pays the final bid price, which is usually significantly lower than the retail price of the item”.

How to Buy Into the Action

Penny Auction sites such as beezid, bidcentsible, bidsauce and bidcactus will typically charge a non-refundable fee of around $15-$20 to get in on the bidding. This essentially buys you bids, which cost between $0.10 and $1.50 each (out of the initial fee). Each bid that is placed raises the price of the item by 1₵ and adds time to the clock, thus extending the auction. At the end of the auction, the winner must pay the price of the item that is displayed (this is on top of the non-refundable fee). 

How Can Penny Auctions Make Money?

By now you might be getting a better picture of how companies can afford to sell a new iPod or iPad for $2.41. Let’s say a product reaches $100, with the cost of each bid at $1.00. Since each bid raises the cost by 1₵, that means that 10,000 bids were placed on that product. Somebody wins, but the true winner is the website owner who just pocketed $10,000 minus the money they paid for the product!

Watch Out for These Penny Auction Scams

There are legitimate penny auction sites out there, and websites such as Penny Auction Watch tracks the sort of information you need to know in order to avoid scams and to make the most of your “pennies”. However, many penny auction sites are filled with scams, and hardly any regulation exists to ensure that you and your wallet are protected. The most common scams are:

  • Shill and Bot Bidding: Some penny auction site owners use automatic software or friends and family members to place false bids in an effort to hike up the prices.
  • Not Delivering Items or No Winner: Some winners never actually receive their items, or no one actually wins the bid.
  • Credit Card Fraud: You can pay for your bids by your credit card, which can be dangerous at some sites. Instead, use paypal so that you are protected.    

If you are interested in finding the legitimate sites and placing bids on electronics, check out To Muse’s article on How to  Make Money Using Online Penny Auction Sites, a review of the top ten penny auction sites, and this penny auction comparison site.

If you want to avoid all penny auctions, you may want to stick to bidding at ebay this holiday season.

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Comments to Penny Auctions: A Great Deal or a Scam?

  1. Dunno about other people, but my Paypal acct uses my checking acct as a primary funding source. So, I’d sooner use a credit card than my Paypal acct.
    That being said, I’d use the Shopsafe feature on my credit card: create a disposable credit card number, so I can limit both the max amt charged to the card and the card expiration date.

    R S

  2. I didn’t know these things existed. I guess the deals can sound pretty tempting. But I still believe in things being too good to be true!

    Khaleef @ KNS Financial

  3. Wow! I didn’t know that this existed either. Thanks for the info. It’s amazing that people would fall for these types of things. It’s almost like you’re gambling for the item. Many people are going to pay money in and get no item in return.

    Chris Gagner &

    • Exactly–think about how many people, in the heat of a deal, quickly purchase another $45 package of bids?

      Amanda L. Grossman

  4. Wow, that is certainly a scam, but I can see the potential value and hence why innocent people might be pulled into it. Thanks for sharing your advice on how to avoid such scams, I think the information will be very useful for those who frequent such events.

    Become a Facebook fan for discounts on Baby Boomer products and more


  5. I’m not a big fan of these auctions either but I can see their appeal. One thing the poster does not mention, but I have seen on these sites, is that they typically allow you to buy the item at the end of the auction minus your costs in bids. So, what the site actually nets is only the money from the bidders who did not buy it at the end. Whether or not the retail prices are marked up, I do not know, but probably a little.

    These sites are then enticing to people who had already decided to buy a particular item at the price the site offers it for ‘retail’. If you want an ipod for $225, you have a gambler’s chance to get it for less with a guarantee to get it for $225 (worst-case scenario).

    As the poster says, make sure the site is legitimate, but I would also add: Make sure the site offers the ‘buy it after’ feature and you are only bidding on an item you plan on buying anyway.


  6. This Penny Auction Watch site is Major scam( Also known as “PAW”.

    PAW is a front for these dishonest penny auction owners to make their sites look legit. Penny Auction Owners plant positive experiences on here(Complaints Board) and on the Penny Auction Watch forums(PAW) to bait people into playing and buying bid packs. Buying bid packs to bid on items? What a joke and scam!

    Go to Flippa[dot]com and search “penny auctions for sale”

    There you can see how these operates by the use of controlled bots on autobid to scam any real people into buying more and more bid packs until the reserve price has at least been met for that item that’s bid on. They aren’t in the business to LOSE money and will never ACTUALLY sell an item below value. If not enough real people are bidding on a particular item for a while, they will end the auction to a bot name. They will then list the bots name in the “Auction History” section to make it look as if REAL people actually win and auction is honest+fair.

    You can buy your own Penny Auction from and start scamming also. So easy to do.

    Also. Google, “penny auction website script” and see how these scams operate. The scripts are cheap to buy.
    To build up traffic to your scam penny auction you must plant positive experiences on forums such as PAW(PAW is a front). You must also dispute ANY negativity or complaints on forums such as this.
    For EX, tell the angry complainer that he must be crazy, use stupid bidding techniques and unlucky because you win all the time and just won a 52inch Plasma for 2 bucks. People WILL start believing you if you plant enough fake postitive experiences/reviews. JUST make sure to use different names each time you fake post. If you use same name over and over again telling everyone you win all the time, people will begin to catch on and realize it’s just a fake post planted by the Penny Site operator/owner.

    They cheat you and make a killing from people like you that bought into it. Some will even go as far as to advertise on social networking sites such as “FACEBOOK” and write stories of winning items for $4 and so on to get people to join the site.
    I call it their, “Fake Social Environment” where they ask and answer their own questions attempting to be perceived as an honest and fair auction. For EX they will say, “I just won 12 Lap Tops for $40 and they all arrived today in factory sealed boxes! I love this site!”

    Anyone can do this… so easy to make money. MAKE sure that the server that hosts your scam auction is located outside of the USA so you can get around federal gambling regulated laws. If heat gets to much, then shut scam auction down and create a new one. Repeat process.

    Happy scammin’!!

    I tried to post that on PAW(pennyauctionwatch[.]com) to warn good honest people BUT they wouldn’t allow it to post.. I wonder why? 😉

    So i’ll just post away on websites such as this.

    You use to could post on PAW right away but now they have a Moderator that must approve your post first.. I wonder why that is? 😉

    I think we ALL know why that is 🙂


  7. Penny auction watch, penny auction traffic ran by the same owners as bidcactus beezid and swipebids these are the real con man


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