Are Penny Auction Sites Legit?


If you’ve spent any time on the internet, you’ve probably seen a few ads showing electronics for extremely low prices.  You know, the iPad that’s selling for $29, digital cameras for $19 or HD TVs for $89.  No, there hasn’t been mass deflation or a flashback to prices of 1955.  These items are a part of sites called penny auctions, which are becoming more and more popular, especially as new auction sites pop up each month.

Before you’re lured into signing up for one of these penny auction sites, there are a few things you should know about how they work.  If you’re not careful, you can end up regretting that you ever clicked on those sites.

How Penny Auctions Work

In order to bid on an item, you must first register with the site.  This may sound simple enough, but with so many penny auction sites out there, you may sign up for a site that isn’t reputable.  The last thing you want is to give out your information to a penny auction site that isn’t legitimate.

Once you have an account, you can purchase bids.  But, it’s not the same as listing items on eBay and bidding for things.  The auction site itself lists each item and you increase the price by a penny with each one of your bids.  The catch is that you purchase these bids from the site, which can average from $0.75 to $1.00 or more per bid.  Many sites will sell bids in packages, so you’ll purchase anywhere from 10 to 100 bids at a time.

After you bid, the price of the item will go up by a penny and the countdown clock will add 15 seconds or so to the clock.  That’s right, even though the clock looks like the auction is over in a minute, it really depends if another bid comes in or not.  If another bid is made, the clock will add 15 seconds or so, and the auction will keep going.

Finally, the auction clock reaches 0:00.  The winning bid gets the option to purchase the item at the winning auction price.  If an iPad auction ends at $29, you get the option to purchase it at $29.  But remember, all those bids you made should be considered if you win.  If you bid 100 times, your total investment is $129.

Sounds pretty good huh?  Yes, for those who win.  But the chances are very low and there are a lot of losers for every auction.  If you didn’t win the auction, all your bids are gone.  That means if you bid 100 times for the iPad and did not win, you just threw $100 out the window.

The House Always Wins

Some would argue that penny auctions are a lot like gambling.  What I know for sure is that the house almost always wins on these auctions – and they usually win big.

Let’s look at that $29 iPad example.  If each bid costs $0.01, the total number of bids would be equal to 2900.  At $1.00 per bid, the auction site has cleared a cool $2,900 for a $499 iPad.  They aren’t giving away anything for $29, that’s for sure!

Before you Bid…

Understand that these sites can be addicting.  There are hundreds of penny auctions sites out there because thousands of people are addicted to refreshing their screen and bidding up items all day.  I’ve read and watched stories of people who would sit for hours bidding on items.  It creates a rush similar to that of gambling and the countdown clock just ads to the appeal of winning an auction.

If you do want to try out a penny auction site, please do your research.  Don’t sign up for the first one you see.  I hope you don’t sign up for any period, but that’s just my opinion.  I personally don’t use penny auction sites because I don’t have time or money to waste.  With the popularity of penny sites growing each month, I thought it was worth writing about in case someone ran across an auction site.

What are your thoughts?  Have you ever tried a penny auction?  Would you consider it to be gambling?  Meet us in the comments!

  1. Jennifer May

    In other words (like Grandma used to say) “IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS”.

    • Tim

      I think your Grandma is right 🙂

  2. cashflowmantra

    I had seen those sites and wondered so I read a little about them and came up with the same information that you have written here. Obviously, it is good to be the house just like in gambling.

  3. Kathleen K

    Thank you for clearly and concisely explaining this concept. It is so important to realize this isn’t similar to eBay, and can end up costing SO much more.

  4. John @

    Thanks Tim for the info! I wasn’t aware of penny auction sites, so I really appreciate your article. I knew the $9 iPad was too good to be true!

    • Tim

      Glad to write about it. I hate seeing people get scammed, and while some people do win, the number of losers are unbelievable.

  5. 20's Finances

    I agree with most of the comments that yes, it is good to be true. (most of the time). These sites exist because great winnings do happen occasionally and then they use these rare occurrences to promote the sites. I don’t like these any more than you do Tim. I stay far away and use my money towards more productive means. Thanks.

  6. Jenny

    Actually, I still don’t understand how it works: I didn’t understand the wording “The catch is that you purchase these bids from the site, which can average from $0.75 to $1.00 or more per bid.” But I think that means, “you can bid but each penny you offer for the item is a penny you have committed to giving towards the item regardless if you win the actual prize or not.” — Also, the wording, “If you bid 100 times, your total investment is $129.” If the auction is a penny, wouldn’t you only have bid 100 pennys = 1.00 dollar?

    • Chris Brown

      Jenny–No, because the Bid VALUE in the auction is 1 penny, but the bid COST to you is about $1.00 per bid on average. So it is true that winning an auction means: [ your bid Cost ] x [ no. of bids] + [final cost of item] + [shipping].

      I’m still looking at these sites, but if I were a shady entrepreneur, I would simply set up bids and then go out and buy the product once the bidding ended. I’d have a ton of money left over. This is probably what some of these sites do.

  7. Mary

    That was a great post!

    The late Dr. Adrian Rogers defined gambling as an endeavor where one person wins at everyone else’s loss (which is why he said investing in the stock market could not be defined as gambling – it’s a shared business enterprise where everyone wins or loses together). Anyway using his definition, I’d say the penny auction sites are gambling! Any time I’ve seen an offer to gamble, the statistics just weren’t on my side. The math was enough to convince me to stay out.

  8. Rose

    Wow, thanks for the explanation! I stumbled onto one of these a couple of months ago, and found an item I was interested in. I went to bid, thinking it was e-bay bidding style, and realized that I had to buy bids – and buy a lot of them – and I am so glad I didn’t… I could see myself getting caught up in the thrill of “oh just one more try” and ending up wasting money fast. However, I wondered how it worked at the end, since I didn’t go through it myself. So I appreciate your explanation. Thanks! 🙂

  9. Paula @

    I signed up for a penny auction site and purchased $10 worth of bids. Big mistake. I’ll never do that again! At least the lesson only cost me $10.

  10. Milkman

    I agree with your admonition to steer clear of these penny auction sites. I just wanted to correct you on one point. On the more legit sites, if you lose an auction, you get your bids back to use on another auction. True, you never get your *money* back, but you can theoretically keep using those same bids over and over until you do win an auction. With a bit of luck and savvy, you *could* still come out ahead.

    On a related note, there isn’t an easy way to figure what a site is earning per auction, since many of those bids are re-used on other auctions. I would guess, though, that they’re still making out like bandits.

    • cheerful

      Which ones let you keep your bids to use again in another auction if you don’t win the item? I think that would be helpful to know.

  11. markjhannahel

    Although I thought I knew how these sites operated, your explanation gives great insight and clarity. Really good article.

  12. Harprit Singh

    You should change the title of your site. It says that if penny auction sites are legit but in your site it dont mention anywhere or discuss anywhere if they are legit or not. Your article all talks about what these sites do.

  13. Mike

    I participate on a penny auction site, that it legit…and wondered about the moral reasons. Just saying the house wins big or the enterprise makes alot of money it not a good reason. The one I participated in even shares the profits with its members, so it can’t be said everyone is a loser. Far as the name of your article..Yes there are Penny Actions the are legit, no doubt about it. If you have more proof from the Christian perspective from the scriptures, I would be intersted to see…thank you

  14. james

    Thanks, i knew there were something off about those types of auctions

  15. Chris Brown

    I’m surprised no one responded to your posting. Thanks a ton for explaining how your site is different and taking the time to post here. I will immediately look into your site. I hope I’m not too late. God Bless!