The Truth About Penny Auction Sites

Win an iPad 2 from a Penny Auction Site

Win this with just a few pennies? Think twice before you try penny auctions.

I have been salivating over the Apple iPad almost since it debuted.

Unfortunately this is a purchase that I simply can’t justify, as I both don’t need it and don’t have the money for it.

However, those harsh realities have done nothing to cool my gadget-lust, and so I have been keeping my eyes peeled for a way to get my Apple fix on the cheap.

And that’s how I first heard of penny auctions. You may have seen commercials for these websites—where you can pick up high priced and in-demand items for pennies on the dollar. Anytime something seems too good to be true, I generally head in the other direction, but I figured an iPad was worth looking further into these auction sites.

How Penny Auction Websites Work

Unlike a traditional auction site, the items offered through penny auctions are not placed for sale by other users. The site itself auctions off the gadgets, gift cards, and gear. The site can afford to do so because it costs money to place a bid.

When a bidder first joins the site, he will have to purchase a bid package of dozens to hundreds of bids—generally spending around $1 per bid. When an item goes on sale, the price begins at $0 and a timer begins to count down to the end of the auction.

Each bid adds $0.01 to the price and 10 seconds to the clock. Whoever made the last bid when the timer reaches zero is the winner.

It is possible to win big with this set up. For example, if you end up using 15 bids to win an item that had 1,000 total bids, you will end up spending only $25 for it—your $15 worth of bids plus the 1,000 pennies. Under those circumstances, I could theoretically get my iPad for super cheap.

How to Win at Penny Auctions Using Strategy

The strategy that winning penny auction bidders use is to wait for the timer to count down to approximately 20 seconds and then start bidding. This will allow you to hold onto your bids until they really count—the end.

The other advice that regulars to penny auctions often give is to cut your teeth on smaller-ticket items, like gift cards. It can be expensive to bid for an item you don’t ultimately win, and that is much more likely with the high priced gadgets.

Another possible way to win at penny auctions is to find the latest, greatest penny auction sites and get in on the ground floor – before the site becomes too popular. With the php script needed to build this type of site freely available online, new sites are opening each day.

The Downside, Including Penny Auction Scams

With these auctions, losing bidders have lost all the money they spent on the privilege to bid. This is why the sites are able to sell their wares for so cheaply—they’re making money on the bids.

In this way, penny auctions are similar to gambling. You put money in, but you have no guarantee of getting something for your investment. But the “house” always wins.

It’s also important to note that some auction sites are unscrupulous, using automated software to drive up bidding. If you do decide to dip a toe into penny auctions, make sure you use one that is accredited by the Better Business Bureau, AND has a solid online reputation (research them!). Then you know that you’re only gambling with other people, not software.

Another common complaint about these sites is that their customer service is not great and that it can take weeks and weeks for winners to receive the item. In some cases, sites have folded before the item was received, and there is no recourse.

The Bottom Line

For me, as much as I love a bargain, I hate the possibility of wasting money even more. So I’m going to get my iPad the old-fashioned way—by saving up for it.

Have you had success with penny auctions? What’s your secret to making it worth your time and effort?

Want My Free 31-Step Money Guide*?

Subscribe for free. Get my guide *31 Days to Improve Your Financial Life, welcome series, and regular Five Things digest. Join 30,000+ other followers.

Powered by ConvertKit

About Emily Guy Birken

Emily Guy Birken is an award-winning writer, author, money coach, and retirement expert. Her four books include The Five Years Before You Retire, Choose Your Retirement, Making Social Security Work For You, and End Financial Stress Now. Learn more about Emily at


  1. Thanks for writing about penny auctions. You are correct in highlighting some of the risks and potential rewards. It’s not easy to win, and there are some unscrupulous sites that have sprung up along the way. I don’t want to make it sound like penny auctions are an easy way to score great deals. It’s takes patience, strategy, and a bit of luck. I’ve been bidding on penny auctions for the last 3 years, and I just finished co-authoring a book called Penny Wise.

  2. Phil, I’m glad you further strengthened my reason for avoiding these bidding sites. I believe that for every dollar I use to bid against others and potentially lose, that dollar could otherwise be going into a savings account. The operative word here would be to have the *patience* necessary to accumulate the necessary money to buy when the item goes on sale.

    That, I know I can guarantee for myself.

  3. I would rather save up for something I would like to have than waste my time on those auctions. I knew somebody who place bids on these auction sites, but he was banned after winning some items. He was suspected of using bots and black techniques, though it was not proven.

  4. Vince Thorne says

    The cumulative effect is what these websites are build on. Its like you and your friend playing blackjact at the same table. You assume you are up against the dealer but are actually playing against each other.

  5. I always thought those penny auction sites were too good to be true. I only looked into one of them before I found out how the sites make their money — by charging multiple bidders a dollar or more per bid. This really adds up for the sites…and for the bidders at home! I agree, I’ll stick with saving and buying the old fashioned way!