We field many inquiries on a daily basis from newcomers to the penny auction industry, and most of them ask the same question:

We understand how penny auctions can seem "too good to be true" to the casual observer. Sometimes, they are. On a typical penny auction site, you will not be able to "buy a brand new car for only $10!" You also won't usually see people winning an Apple iPad 2 for "only $.10!" We also acknowledge that there are bad apples out there, whose unscrupulous activities paint the entire industry in a negative light. Unfortunately, these bad apples are the ones who get all of the media attention. After all, how exciting is it to report on a business that does everything right?

Consumers never hear about the penny auction site owner who sends a personal, hand-written letter with every win he/she ships out; about the penny auction site owner who has been known to ship an extra surprise or two (like funky, fuzzy socks!) with the wins he/she sends out; about the penny auction site owner who underwent thorough investigation by a third party to ensure that he/she is operating fairly and honestly; or about the penny auction site owner who has positive reviews on every reputable forum and review site in the industry.

We believe that the negativity about the penny auction industry stems from a general lack of understanding. Consumers do not understand what a penny auction site is, how to play and win, and how to determine if a site is legitimate or a true scam.

What penny auctions are: Penny auction sites are known as "entertainment" and "competitive shopping" venues. They were never meant to take the place of your typical mall, Amazon, or even eBay. There are several sites that offer a "Buy It Now" option, such as Beezid, SkoreIt!, and QuiBids, which consumers can utilize to buy the desired item at a price near, but still below, retail.

In short, penny auctions are basically a bid-fee auction, where you pay per bid, usually buying bids in what's known as a Bid Pack. Bid prices can range from $.30 to $1.00/each, depending on the site. With each bid you place on a traditional penny auction, a bid is deducted from your account, and the price of the auction rises by one penny. Each bid also increases the timer by a set increment, so that others can place their bids, too. This usually sparks a "bidding war" as the timer counts down. Whomever has the last bid placed when the timer reaches "0:00" is the winner. When you win, you are "out" the cost of each bid, plus the final auction price and shipping (if it's not free).

(For a more detailed explanation of a penny auction site, please click: Penny Auctions: A Brief Overview)

What penny auction are not: Penny auctions are not gambling. The penny auction bids spent, and their value, are not being wagered, bet, staked, or pooled cumulatively for the purposes of winning the sum total therein. These are merely the price for playing the game. Legally, bids are defined as a participation fee. These are allowed, by law, as other games of "American Tradition" such as horse shoe tournaments, basketball games, or hole-in-one events all have prizes and entrance/participation fees, and were ruled not to be gambling by varying courts.

(For a more detailed analysis, please click: Are Penny Auctions Gambling?)

As we've repeated ad nauseum over the past year, the best way to determine whether or not a penny auction site is legitimate is RESEARCH. It can be exciting to find a site where tablets, laptops, designer purses, and other valuable, desirable items are up for auction; especially when you see that you could win something at "up to 99% off!" However, as you are dealing with your hard-earned money and your personal information, you must take extreme caution.

• Research the penny auction site. Go to reputable forums and review sites, such as the PennyBurners Penny Auction Forum, PennyAuctionHelp, PennyAuctionList, and PennyAuctionScore, and read the reviews left for the site in question, left by real bidders.
• Don't be shy! Ask questions. The penny auction community is a friendly one, and bidders are always willing to share their experiences, hints, and tips. For example, an enthusiastic Beezid bidder and PennyBurners member started a helpful thread titled: Beezid Beginner Tips that has helped many other bidders transition from "newbies" to "seasoned bidders".
• Read the Terms & Conditions and Rules of the penny auction site very carefully. We recommend that you take a screenshot of them in case an issue arises in the future. Make sure you understand all fees involved in becoming an active bidder before you give the site your credit card/payment information.
• Study the auctions. Which items tend to attract a lot of bidders? Better yet, which items tend to attract a lot of "heavy hitters"? What time of day is the site less active? How do the timers and auto-bidders work? What bidding strategies seem most effective?
• Set a budget and never over-extend your finances.
• If you do not win an auction, re-evaluate your strategy and your fellow bidders. Read as much as you can on the penny auction forums and review sites; ask more questions!

So, when consumers are armed with proper information, and when they exercise intelligence and caution before giving away their financial and personal information, they will find that penny auctions are just like any other game. They can be fun, entertaining, exciting, and if played right, even rewarding.

No, penny auctions are not scams.