What is a penny auction?

penny auctionA penny auction is usually a website that posts items and merchandise and auctions them off to customers through an online bidding system. You’re probably thinking, what is the difference between a penny auction and a regular auction? Well, unlike traditional auctions, with penny auctions you to pay upfront before you bid, whereas in a traditional auction, only the winner pays; that means that in a penny auction, you could lose money and never win anything. Also, the bidding starts at, you guessed it, $0.01.

However, most penny auction websites charge a fee for each bid, so each bid ends up costing you more than a penny. You usually buy these bids in packs (the more bids you buy at once, the lower the cost per bid usually) so that will determine how much you spend on each bid, but in many cases the cost of each bid is about $1. Keep this in mind every time you bid, that the cost to you isn’t a penny but more than that; the best plan is to calculate exactly how much each bid has cost you and take that into account when biding on an item (you wouldn’t want to end up bidding more than you think it’s worth…and imagine if you didn’t even win the item!).


Generally, when you see an item available to bid on, you’ll see a photo of the item, a countdown clock notifying you of how much time you have left to place your bid, the retail price of the item, the current highest bid, and the price you can pay if you just want to skip bidding and buy the item immediately. There is a large button to “bid now” on each image, making it easy to get right to bidding. In terms of the merchandise and items available to bid on through penny auction websites, it completely depends on the site, but generally there is a plethora of technology and gift cards (to chain stores or restaurants), and some sites also have jewelry, clothing, products for the home, toys, tools, appliances, and more.

A good penny auction site will have multiple items available for auction that are organized into categories, and auctions won’t drag on for days but rather hours (or less). Many sites, especially the good ones, will also have a page where you can see what types of items have been won and at what price. Other sites offer an auto-bidding option, which automatically places bids for you when you aren’t at your computer.


When you see an item you want to bid on and start participating in the auction, each time you, or someone else, places a bid on the item for auction the price goes up one penny and the timer resets (usually for another 10 seconds, the amount of time will depend on the website). The flashing countdown contributes to the excitement of bidding on penny auctions and can make it feel like gambling. At some point the auction ends (when the timer runs out and no more bids have been placed), and the last bidder wins. Meaning, if you were the last person to place a bid before the timer ran out, you have won the right to buy the item at the cost of the final bidding price.

Not all penny auction websites work this way; some have a different bidding and auction scheme, such as a winning by placing the lowest unique bid (your bid will be deemed the lowest unique bid when an auction ends and you are the first and only member to have placed a bid as close to zero as possible without guessing a price that someone else has already bid). No matter what method the site uses, the hope of penny auction websites is that what you pay for the item you won is much lower than the retail price of it.

Getting your item

Once you’ve purchased the item you’ve won (if you in fact decided to do so, which you probably did since there is usually no way to recover the money you spent bidding), it is up to the penny auction site to send you your item. Make sure you read about shipping policies (costs, times, etc.) on their website because often there are costs associated with the shipping of the item. Also, there have been many complaints about shipments that were late or never arrived at all, or customers complained about receiving products that weren’t what they were expecting. For this reason, it is recommended that you use a credit care to purchase the item so that you can get a refund in case something goes wrong (if you use cash you’ll probably never see it again even if you don’t get the item you purchased).

Fair practices

Many of these penny auction sites use fair bidding practices such as “win limits” which prevents any one user from winning too many auctions is a designated time period. This makes the playing field fairer so that the same skilled bidders don’t keep winning again and again. Also, some auction sites have auctions that are just for people that are new to penny auctions (maybe they haven’t won anything yet, for example) so that they compete only against people at their own level of skill.

Penny auctions haven’t been around long, and their popularity really came about in 2009. Unfortunately for the owners of these sites, most of them have now gone bankrupt and shut down. Many people think this is because penny auctions are a scam, but that is not true. They are just risky, both to the customer and to the site owner, which is probably why many of these sites have closed down. However, many sites are still up and running today and have auctions going on at this very moment. As long as you know what you’re getting into and how it works, there is nothing wrong with trying out a penny auction site and seeing what it is all about.