Penny Auctions

A ‘penny auction’ (the popular name for bidding fee auction) is an online shopping method where everyone taking part pays a small, non-refundable fee each time they place a bid on an item. When the auction expires, the last person to have placed a bid wins the item and also pays the final bid price, which is supposedly much lower than the item’s retail price (but this is not always the case). This makes penny auctions unlike standard online auctions, where nothing is paid unless the bid is successful.

The risks

  • A high risk of losing the auction having already spent money on bids, as auctions are open to an unknown number of players, including those in other countries.
  • Placing more and more bids without realising how much you are spending.
  • Using automated bids, which can prolong games and raise the stakes for competing players who stay in.
  • Network and other technical issues which could unintentionally delay bids by critical seconds, especially when many people in different countries are playing the same game.
  • The inability to assess other bidders’ strategies.
  • Receiving goods which do not match the advertiser’s description.
  • Not receiving goods which you have successfully bid for.
  • Having your penny auction identity stolen and used fraudulently.
  • Having your personal/financial information stolen and used fraudulently.
  • Phishing emails, appearing to be from penny auction or online payment sites but actually from criminals trying to lure you to a fake website to get your personal information such as login details for your online payment account.

Use penny auctions safely

  • Be wary about using misleading or fraudulent sites. Look for online reviews or comments about the sites to see if other consumers have experienced difficulties.
  • Know what you are getting into: since you pay to bid, penny auction websites are more like lotteries than traditional auction websites. Sites can offer deals – but purchases can also turn out to be more expensive than expected once all bid costs are added in.
  • Be aware of your legal rights as a consumer. You may be entitled to return goods and obtain a refund if the goods you receive are of unsatisfactory quality, not fit for purpose or do not correspond with the seller’s description.
  • Always check the seller’s terms and conditions for time limits to avoid disputes.
  • Remember that you may not be entitled to return goods simply because you decide you no longer want them.
  • Always read the small print and be very clear on what you are signing up to before you agree to any terms and conditions.

And always remember…

  • Use strong passwords. Never reveal your penny auction or online payment passwords to anybody.
  • If you think that your penny auction or online payment account has been compromised, take action immediately. Check the site’s online help page.
  • Be wary about clicking on links provided in unsolicited emails. For example, it is better to enter your bank’s website address into your browser directly, or use a bookmark that you created using the correct address.
  • If you pay by payment card, remember that a credit card offers greater protection than with other methods in terms of fraud, guarantees and non-delivery.
  • When paying either by online payment service or payment card, ensure that the link is secure, in two ways:
    • There should be a padlock symbol in the browser window frame, which appears when you attempt to log in or register. Be sure that the padlock is not on the page itself … this will probably indicate a fraudulent site.
    • The web address should begin with ‘https://’. The ‘s’ stands for ‘secure’.
  • The above indicate only that the link between you and the website owner is secure, and not that the site itself is authentic. You need to do this by carefully checking the address for subtle misspellings, additional words and characters and other irregularities.
  • Always log out of sites into which you have logged in or registered details. Simply closing your browser is not enough to ensure privacy.
  • Keep receipts.
  • Check credit card and bank statements carefully after shopping to ensure that the correct amount has been debited, and also that no fraud has taken place as a result of the transaction.
  • Ensure you have effective and updated antivirus/antispyware software and firewall running before you go online.

If you think you have been a victim of fraud:

Report it to the police.

Jargon Buster

A Glossary of terms used in this article:


An attempt at identity theft in which criminals lead users to a counterfeit website in the hope that they will disclose private information such as user names or passwords.


A number of computers that are connected to one another, together with the connecting infrastructure.