How Legit are Penny Auctions?

You’ve seen the ads posted online “Ipods for 90% off retail” and “laptops for under $20” how are prices like these possible?

The answer, is Penny Auctions and they’re popping up all over the Internet.

Before you sign-up though I thought I would give you a breakdown on how these sites make money, how you can win more stuff for much less and which site offers you the best deal.

How a Penny Auction Works

Penny auctions work very much like an eBay auction. Items are offered up for users to bid on, with each bid increasing the price of the item until the person with the highest bid is declared the winner. There are 3 key differences though.

1. Obviously as the name suggests, all bids are in increments of a penny.
2. New items are offered up every few hours and are not posted by users.
3. You need to sign up and purchase bids in advance.

Once you have successfully won an auction your account is charged the amount of your final bid plus a shipping cost to ship the item to you. These shipping costs vary depending on the size of the item you have won. Larger items such as a barbecue will cost more to ship than a gift card. The shipping charges are very reasonable and closely reflect the actual shipping fee paid to the postal service, unlike some ebay auctions shipping is not where the auction sites make their money.

Unfortunately most penny auction sites only ship items to residents of the United States, plus Hawaii/Alaska (for an additional charge).

How Penny Auction Sites Make Money

Most penny auction sites operate on a “pay for play” system. Meaning that in order for you to bid on the items up for auction you need to buy bids from them. For most sites the average cost to buy 1 bid is $1 .

So every time you place a bid for a penny it is actually costing you $1 from your account. This is where the auction site is making their money and are able to offer high end items for such a cheap price.

Lets take a look at a recent auction from Bidcactus.com for a $50 Starbucks gift card. This auction had a total of 383 bids when if finally ended. The winner ended up paying $3.83 plus $4.97 for shipping, a total end cost of $8.80 for $50 worth of Starbucks goodness.

Good deal for the winning bidder but an even better deal for the auction site. Since Bidcactus only charges .75 per bid (see how to get free bids below) they would have made $287.25 for a gift card that costs them $50.

A handsome profit which is how they are able make this a viable and legitiment business. This auction was actually on the high end. I have seen a ton of gift card auctions end with .05 to .20 winners.

Best Penny Auction Site?

There are quite a few sites to choose from but my personal favorite is Bidcactus.com for a few reasons.

1. They have one of the lowest bid prices at only .75 each compared to other sites that charge $1 or more.

2. Wide range of items up for auction, everything from gift cards to flat screen TV’s there is something for everyone to bid on.

3. They offer beginner auctions, where only new people that sign up or users that have just a few wins under their belts are allowed to bid on.

4. Bidcactus offers great promotions that allow you to get free bids and bids at discounted rates saving you even more money on the items that you want.

Those are just a few of the reasons why Bidcactus is my top pick but there are many more. They are a reputable site with tons of testimonials from winning bidders and accreditation from the Better Business Bureau with a good standing record, which is more than I can say for some of the other penny auction sites online now.

Bidcactus.com Promotions

Purchase any bidpack between 2am – 7am (eastern time) and receive 5% off your total purchase. Use Code “NIGHTOWL”

Purchase any bid pack between 6pm – 8pm (eastern time) and receive 5% off your total purchase. Use Code “EVENING”

Purchase a 50 Bid Pack on Friday between 4pm – 7pm (eastern time) and receive 5 bonus bids FREE!

$10 off your first winning bid – Use Code K2T88C or K2T8BC

That is basically it, if you are a resident of the United States Sign Up today if you don’t have an account already, come back and leave a comment and let me know all the great stuff that you’ve won.