Penny Auctions for Dummies – MadBid’s Review

Published 11-04-2014 | Updated 07-10-2022

If you are wondering how penny auctions work, look no further, we have devised the perfect penny auctions for dummies guide. So you probably heard that you can get brand new products for a fraction of the retail price through penny auctions. You also probably heard that penny auctions are a scam; products selling for such low prices are too good to be true, right?


Before you decide if you want to try penny auctions, read the step-by-step guide of how they work and the different types of penny auctions that are out there.


The name ‘penny auction’ comes from the fact that auction prices can only go up by 1p at a time, participants cannot decide how much they want to increase the auction price because it’s already pre-set at 1p increments.

There are over 50 different types of penny auctions around the world, but the majority of them are based in the US which doesn’t offer much choice for customers on the other side of the pond. However, whatever choice is lacking in Europe, it’s certainly made up in the penny auction quality, usability and customer care.


Penny Auctions Explained:

  1. Sign-up is free
  2. You need to pay to participate in auctions but if you want to just browse and shop, you can do so without joining the auctions
  3. You probably want to join the auctions because this is where the big discounts are. To start you need to  buy a credit package.

Credit Packages

  1. Credits are a form of currency used in penny auctions, 1 credit has a value of 10p usually, but you can check this by simply dividing the number of credits in a package by the price you buy them. Example: if 550 credits cost £27.99 then 1 credit will be valued at £0.05.
  2. When you have your credits, you will notice all auctions list how many credits are required to place a single Bid. Bigger items require more credits, so start with the smaller value items, these usually have less competition which means you will usually have to spend less bids.
  3. Every time you click Bid, you will see the number of credits that auction requires deducted from your account.  Credits will be deducted every time you click Bid.


  1. You will also notice that every auction has a timer.
  2. Timers may vary for different auctions.  A car auction might have a 1 minute count-down timer but headphones might have a 30 second timer.
  3. It’s very important to watch the timer because when the timer runs out (00:00) it means the auction is closed.
  4. The winner of the auction is the last person to place the Bid before the timer reaches zero.
  5. You might think 30 seconds is not a very long time for an auction, but here is the fun part, every time someone clicks Bid, the timer re-starts. This means that the timer might be counting down to 5 seconds but if someone clicks Bid, it goes back to 30 seconds and counts down again until no-one places a bit and the timer runs out.

Winning an Auction

  1. If you are the last person to Bid before the timer runs out, you win whatever you were bidding on. If you clicked Bid, saw the auction price go up by 1p and the auction closed, then you should get a pop-up with a summary of that auction saying you won.
  2. To claim your product, you will have to pay the auction closing price which is on average 80% cheaper than the retail price (auction prices only go up by 1p).
  3. You will also have to pay shipping and handling to get your product delivered. Most reputable companies have delivery tracking so be sure to check before you Bid
  4. Your product should be delivered with a manufacture seal and all the original packaging, regardless of the auction closing price. Make sure to check all the contents are there when it’s delivered. All reputable penny auctions should offer a standard retail refund policy so if you are not happy with the product, it’s simple to return.

Not Winning an Auction

  1. If you were clicking away on the Bid button and someone else won the auction, usually the credits you placed in that auction are non-refundable.
  2. MadBid is the only website that refunds all paid credits you place in an auction automatically so you can use the value of the spend credits to purchase either the product you’ve been bidding on or any other product on the website.
  3. The fact that most penny auction website do not offer a refund on spent credits has sparked controversy and links to gambling. BBC investigated penny auctions back in 2008 saying ‘Unlike eBay, where you can bid for free, users have to pay between 40 pence and £1.50 to place a bid.’  – Overall there has been very little development in the area to protect the money customers spend when placing bids. MadBid is the only in the world that ensures customers still get to make the most of the full value of credits they spend in the auctions.
  4. Other penny auctions do have some flexibility by allowing customers who do not win an auction to use the full value of the credits spent in that auction to buy the identical product they were bidding on. This is great if you already have the budget to buy a laptop, so if you don’t win the auction, you can still use the spent credits + pay the extra needed to meet the retail price of the laptop to make use of the used credits.

Customer Reviews

  1. A lot of penny auctions show off photos of their auction winners. Make sure to look out for things like customer testimonial videos that give more insight on ways to win  auctions. Also, a fundamental point would be to ensure you have at least 3 different ways to contact the customer service department, if there is no customer service number available on the website, then we suggest seriously thinking about whether you should be spending money on a site that does not have an immediate way to get in touch.

Penny auctions can be a lot of fun, so take your time to understand how they work and the kind of auctions you want to go for.

Let us know how you get on in the comments section below.