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iPads For $40? Is It A Scam?

We have all heard of the bargains that can be had by savvy bidders through online auctions, but have you ever heard about someone getting an iPad for $40 on eBay?  These are the kind of prices that items are sold at every day at penny auction sites.  Maybe I live a sheltered life, but I first learned of penny auctions only a couple of weeks ago.  One penny auction site,, is currently being promoted in a number of national radio ads.

How Do Penny Auctions Work?

To get started as a bidder, you set up an account with the online penny auction site and you purchase a bid package.  At you can get started for as little as $9.95.  Once you purchase your bid package, you can begin bidding.  The auction price goes up in increments of one penny (thus the name penny auctions).  Sounds good so far, right?

Major Penny Auction Sites

Penny Auctions – The Catch

In a penny auction, you pay a fee each time you bid.  The amount you pay per bid will vary, but 60 cents per bid is the rate at  If the bidding on an item reaches $20, that means that in increments of one penny there have been 2000 bids.  As a result, the auction site has already collected $1,200 in bidding fees.  Remember, there is only one winner in each auction.  Dozens of other bidders that shelled out bidding fees get nothing!  (Some auctions allow you to use your losing bid fees to purchase the item at full retail).  This only applies to select auctions, so you must read the fine print if you intend on using this as your “Plan B.”  Since the auction site is collecting hundreds (maybe thousands) in bidding fees on a single auction, the actual winning bid price for the item is irrelevant to them.

Penny Auctions – It Looks So Easy To Win



Much like the slot machines in Las Vegas give the gambler the illusion of a near win, penny auction sites make winning look so easy.  For example, why not just wait until the final 5 seconds of an auction and start bidding then?  You might have a real chance of winning, right?  The auction clock adds 10 more seconds each time a new bid is entered making the real ending of an auction impossible to time.  These sorts of gimmicks keep people bidding at 60 cents or more a pop and everyone loses their money but the one winning bidder.

Penny Auctions – Is It Gambling?

I have personally concluded that these sites are gambling and they should just say that upfront.  The home page is filled with the most recent bargains that give the user the false perception that anyone can purchase these items at these same prices.  It appears that quite a few state attorneys general are already pursuing penny auction sites. They should probably be regulated as gambling sites, but at a minimum they should be required to provide very visible disclosures about the actual odds of winning an auction.  My advice; stay completely away from these sites.  Can I coin a new term since I can't decide if it is a scam or gambling –  Scambling.  Maybe we can get this word added to the Urban Dictionary.

Helping you make the most of God’s money!

James L. Paris
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