Are Penny Auction Sites A Scam?

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I thought it was time for me to spend some time being Eddy the teacher and explain to you what the heck penny auctions are. You've probably noticed them all over the web especially on PTC sites like Hits4Pay, Clixsense that many of you look at each day. If you're anything like me you've probably thought to yourself ‘What in the world is this?'. Or you may have just assumed these things are scams as my cynical ass did. But you know what they say about ‘assuming'. I decided to take a closer look after a few people had asked me about them and reading an article.

What is a Penny Auction?

A penny auction site is a kinda simple Simon competitor to eBay. The owner of a Penny Action website has merchandise and/or gift cards up for sale. Each time someone bids, the price goes up by a penny. It also adds more time to the auction. None of that squeeze in at the last megasecond and getting your bid in. Depending on the site there could be popular merchandise such as an ipad, iphone, etc. Or it could specialize in one kind of thing or be just gift cards. Most are a combo. You have probably seen the ads, Bid Cactus, BidSause Beezid are a couple that come to mind as ones I see all the time. Ultimately the benefit of a penny auction is a place where you can win in demand products, gift cards, etc at a fraction of the cost.

Of course it is not THAT simple….

Here is the deal, in order to have the chance to place a bid, you must first join the website and put $10-20 on account. Say what? That's what I felt too. In any event, each time you place a bid, not only does the price of the item you bid on go up a penny, but you pay the Penny Auction website a fee for the ‘privilege and opportunity' to bid. This will be anywhere from 5 cents to a buck fifty per bid. Ummm….? Okay, let's try to keep an open mind and not jump to conclusions here. Although just reading that it sounds like the Penny Auction site owners are already winning here. But keep reading, there is a method to this madness. So lets get to it.
To make this explanation easy I am going to pretend there is a Penny auction site called BidEddy. You joined and put $20 on account. Now, BidEddy has a $50 gift card up for auction. The final bid that you happened to win was $10. (Remember, the draw of these sites is buying good stuff for a lot less money.) When you win, you will pay the $10 for the gift card from PayPal. You also along the way paid BigEddy $1.00 ( automatically deducted from your account) for each bid you placed. In this case you made 10 bids which ended up being $10. Bottom line, it cost you $20 (plus shipping and handling) for the gift card. So it was a bargain deal. There will still be $10 on account to use for a future auction.
Now the website owner not only got your $10 for the 10 bids you made, but they got $1.00 for each bid all the other people who were bidding on the gift card put in. Say there were 20 other folks trying for this thing and each of them put in 10 bids, That would be $200 they collected just from the bids. They made $150 on the deal. Now if only 4 other people were bidding, and each put 10 bids they would have brought in $50 and broke even. so you see how they make their money to pay for the stuff they sell and let you buy for less. Sounds like a pretty sweet deal for the owners and the lucky folks that happen to win. But more so for the owners of these sites. lol
Please note BigEddy Auction does not really exist. Although now that I know how this all works, a brother might consider starting a site like this. lol

What merchandise is usually found on penny auction site?

They are going to go for the more popular items, because if you think about it the more interest, the more bids, the more bids, the more money they make. So electronic stuff is big, but you can find other things too. Gift cards are probably the most popular. The best sites will have lots of choices for you, and not be a one horse show. If it were me, I would start off with gift cards to get the hang of it.

Is there a way to tell the best Penny Auction sites?

Here are some points to consider to help you determine which sites are worth your time. You can tell how long a site has been around and how legitimate it is, by how many auctions are going on. Some will have eight going at once. With new ones starting and other ones ending every few minutes. This means they are making money. If you run across on with just one auction at a time, or that it only runs once a day, you know it is a new site.
This does not mean it is a scam! It means there are not as many people yet making the owners money. However with fewer people you might have a better chance of winning a bid, but you can also be taking a risk this may end up being a scam site. But if you've been on my site long enough you already know how to avoid scams. It's called research! Following the steps in my scam video can be applied to researching any Penny auction site. Nothing changes, always do your research before joining a Penny Auction site and you should be able to find the best ones based on the feedback out on the web. If someone is doing dirt and has been doing it for a while, it will be out there. And if there is no information out there about a given Penny Auction site, keep it moving. Stick with ones that have a proven positive history.
Keep in mind every company will have a few complaints here and there. You just want to avoid companies that have more consistent complaints than praise.


There are three things in particular to watch out for with Penny Auctions. Your scam research would probably make this evident. But it's worth noting anyway.
One: and probably the most important thing is for you to be sure that there are real people are bidding and not what they call ‘shills,' who are friends, family and employees they set up to put in fake bids to up the price and make you put in (and pay for) more bids than you needed to.
They also might use ‘bots' which is an automated scripts that also artificially raise prices. Both of these practices make it impossible to win a bid this way and defraud you of your money.
Here are two ways to tell if this is happening. Check the bid times, if the same person is bidding all day and all night, it is probably a bot. If you are more sophisticated you can go in and find the site traffic statistics and compare that to the number of bids. If there are a 1000 bids an hour but the Google stats say there are 50 visitors an hour, something is fishy.
Two: make sure the company delivers the merchandise. You can be sure there will be loud and clear complaints online when people pay for something and do not get it. This is one reason to use Pay Pal, it is easy to get a refund with them if something pops off.
Three: Credit Card Fraud. Not surprisingly there are some Penny Auction owners out there who defraud you by over charging your credit card. Your bid was $50 and when the statement comes you see they charged you $150. This is just one of the tricks they play. Pay Pal avoids all of that, as you must approve ahead of time any money being sent.
This does not mean not to use your credit card. If you did the research and it is an established site, with good reviews and a solid reputation, and you see they not only offer credit card put also Pay Pal you should be fine. If it is brand new site, with questionable reviews or for a new site no reviews and they only offer credit card with no Pay Pal, that is a red flag. Go to a different site. Why take unnecessary risk?

Now lets turn things around and talk about what you can look for

1. Take a good look at exactly what each site is offering and make sure there are enough things that you would normally buy. Don't bother registering if the items for sale are not things you are interested in! A vegetarian will not be served by an auction site that specializes in Omaha Steaks.
2. Don't register to get one thing that looks like a bargain, when the rest of the stuff on there is not up your alley. For example say there was a great deal on an answering machine and you notice that they also advertise DVDs and you think great, I can also pick up some DVDs cheap. But when you go look at the titles they are all KungFu movies that are a dime a dozen out in the real world. This site might not be for you. Find another one with kitchen appliance AND other things you know you would buy.
3. Think Christmas. Take a look and pick sites that you see good potential for those Christmas gifts and you can grab some of these gifts all through the year at great prices.
4. I mentioned this before, but it's worth saying again. Be sure there are enough auctions. You want auctions that are ongoing and the best ones will have multiple auctions going on at the same time.
5. Look for what seems to be the most sensible price on bids. The now defunct BidEddy charged a buck and bid and that frankly is a bit high. Between fifty cents and seventy-five cents is more like it. Once you get good at this, you can play around with higher bids for products you really want, and you have learned some bidding strategies. The decision on if it is worth the price is up to you. The website has to do what it can to make it worth your while.
6. The same thing goes for the number of users. We talked before to make sure the number of users matches the bids, but there is a balancing act involved. Too many users make it hard to win bids, too few users and they can't afford the good stuff. You kind of just have to pick one of them, and learn some strategies like off hour bidding.

What I dislike about Penny Auction Sites?

– Well, the main one that comes to mind is the chances of winning a bid. Each time you bid, you pay average 50-75 cents, if you do not win, that is money down the tubes. You have to be right on top of it and watching to strategically place your bids. You do not want to pay a hundred dollars in bids over several auctions for a $50 gift card. There is no way to guarantee you will be the last bidder as each time a bid is made, more time is added to the clock, so someone else could step in and out bid you.
– From what I can tell, this could be time intensive. You must be there for the last two minutes of the auction, and as long as bids are put in, time is added and that can go on for 5-15 minutes longer. You can't leave, as you have to strategically get you bid in.
– You need to be organized and do pricing homework. You must know what the retail cost of the item you are going as well as the Amazon or other discount prices that you can find. Be sure to add on any shipping and handling fees! Then you must keep track of your bid price and the running tally of the number of bids you make. Here is the hard part, you have to put the competitive spirit away and train yourself to stop when it gets close to what you could buy it for off line. You only win if you get a really good bargain, not when you win the auction. The penny auction sites bank, and I mean all the way to the bank, on your competitive nature taking over.

So are Penny Auctions as scam?

At the end of the day, I think Penny Auctions sites might be a good way to save yourself some money if you keep in mind the observations I've made above. But as always be aware of the scamming sites and do your research! By the way, if this article didn't really do it for you in terms of fulfilling your hunger to learn legitimate ways of making money online, check out my recommendations page or jobs page. That should fill you up.
In any event, has anyone tried a penny auction site? If so, please share your experience below. Or if you have some tips or advice, feel free to chime in as well.

17 thoughts on “Are Penny Auction Sites A Scam?”

  1. i did bid on penny auction previously, i am curious when i saw the time is closing soon , and nobody bid for the items, but when i bid, i must lost the bidding, sometime i am curious is a real bid or control by the website systems, what i means is not human bid for the items, is their systems automatically shift bidding to bid up the price when someone bidding it.

    i am just sharing my experience, don’t know others experience is how , mind to share?

  2. I’ll be honest I thought the same about some of the comments. I’m pretty good at deleting nonsense like that. So it never gets the light of day. But I guess I may have been off with some of these comments. lol

  3. Good Morning Eddy,
    I came across your site this morning and want to comment on Penny Auctions.  My husband and I actually had a Penny Auction site built for us last fall.  Turns out, the company building the site scammed us and I’m sure many others.  We were told the site was custom – it wasn’t and didn’t do what we wanted so we never did launch because we didn’t want to run another scam penny auction site, which many are, I know this from my own personal research and experience.  Most of these sites used ‘robots’ which are pre-programmed by the company under a certain name, to bid on certain products for a set amount of money, with a maximum price tag.  You, the consumer, usually don’t know if the bidders are real or not because some companies will constantly create new ‘robots’ under new user names.  

    I call it gambling. It is for sheer entertainment and is no different than putting your money in a slot machine.

    Hope this helps!  Thanks for your awesome site!


    • Thanks for sharing your experience. I tend to agree with you and why I wouldn’t personally use them. But I also find no pleasure in gambling. Lol

  4. Hi there,
    Just found this site very helpful. I tried Quibidz and the first time I tried it, I won 3 items and didn’t have to use all of my credits or spend a lot of money ($1.00 for processing). When I signed up there was a tutorial that I read and put into practice as soon as I started. I thought it helped me not to lose all of my money or control of the bidding process. One of the items I won I did not really want and I did not have to pay for the bidding cost me 60 cents, the item was worth $25.00. So far I’m impressed. It does take some patience to get what you want for less than retail.

  5. I’m skeptical. I saw a video exposing so many ways to lose money in spite of the fact that once in a while someone will win. Shills, bots, two different screens for bidding on the same product, and if the bidder happens to land on the wrong screen page they are SOL!

    • I hear ya and why we warned of these vary scams and concerns. Like anything it’s all about doing your due diligence and research. This limits the likelihood of being scammed. But I hear ya. You should be skeptical.

  6. Dustin,
    Thanks for chiming in bro! You’ve made some great points! It’s good to hear from you. I was wondering what happened to you. I hope things get better for you man! I’m going to keep you in my prayers. Thanks for the birthday and home wishes. Feel free to email me if you need to chat buddy!

  7. Hi Eddy! 😀 Just thought I’d chime in on this with my (Limited) experience. I signed up for one a long time ago. I never won a bid because, honestly, I don’t really have the patience for that kind of bidding lol. I do want to add a warning on penny auction sites (It doesn’t apply to everyone, but it’s worth bringing up). When I was thinking back on the penny site I was on, my brain (The reason microscopes were invented lol) wandered over to ICS because of one common attribute, both sites are made in a way to get you excited as all hell. The difference is, if you get to excited on a penny site you’re going to lose your ass..”Bidding on something you want, looking around in the time you have to wait, oooooo I need that too, bid, and that too, bid” and so on. They make it real easy to forget that you’re actually spending money to bid. I recommend looking around first, finding something you really want and stick to it, and don’t look around till you get more organized and experienced with it.

    On a different note, this is one of them business models that’s so simple it makes me think of post it notes and the traditional “Why the hell didn’t I think of that” lol

    P.S. Sorry I’ve been absent of late, Eddy. I’ve been having more real life problems than an octopus could shake a stick at lol. So, happy belated birthday to “Princess” and congratulations on moving into the new house! 😀

  8. hey Eddy and loyal subscribers…. I was curious about these things one time, and so I clicked on one of those ads that show up in my email just to watch and it was like an eight ring circus must look like to a little kid ( this thing had eight auctions going on at once.) Lots of action and not knowing what the heck it was about.
    After reading this, I may have found a new way of entertaining myself. Now that I get it I tried BidCactus and they have 15 auctions going on at once. There was one gift card that several people were bidding on and it kept going up and up while over on another auction the same gift card went quickly. and much cheaper. I saw an $50eBay gift card go for 11 cents. You could get addicted to just watching these things! You know like back in the day when you could easily go and watch the planes land at the airport? There was always another one coming in….
    I’m not sure I am organized enough to actually try this thing! I have bad impulse karma. But I can see how it could work for holiday shopping…..
    Can’t wait to read what other folks have found and which ones they like!
    Yes I know, I might have to do some thinking about getting a life…….

    • Sue, you’re hilarious. lol
      Thanks for chiming in. I’m there with you, I don’t think I would be organized enough to try this or disciplined enough. I never liked the whole bidding process. Even when I use ebay, I just try to find the buy now options because I know I suck at bidding. lol

  9. Hey Eddy! Ive tried Around xmas I wanted to get something simple for my family and said why not? The site had a lot of good items and good quality items. Items such as computers, cameras, gift cards, kitchen gear etc. They ship very fast and in good condition. The site is easy to use and they find ways to make it funner by giving you badhes for other small accomplisments like winning on the first bid. I randomly clicked on a wok trying the site and goofing off honestly and won it for 3cents! So it totalled about 3.00 total according to your calculations and the retail value of the wok is 100.00! I would do it again.

    • Sounds like you have some free advertisement going on here. Some of these comments sound just like marketing – Oh yeah I got $100.00 worth for 3 cents on my first try… Here I have a bridg to sell you..  

  10. Haven’t tried it yet b/c I couldn’t figure out how it wasn’t a scam! Thanks so much for laying out all the info and so clearly….


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