How to get your Penny Auction Merchant Account Approved

May 09, 2014

Penny auctions have become an attractive way to make a profit in an online-only context. Penny auction websites can be set up with ease, if you have a good code, and are relatively automatic in operation assuming you can ship your items in a timely fashion. The trick is setting up a penny auction merchant account. US Banks as a rule of thumb won’t open a penny auction merchant account, creating complications for your credit card processing.

How Penny Auctions Work

Penny auctions are set up to have bidders bid in small increments, like a penny, on a given item. Each penny is charged to the bidder’s account and will increase the time remaining on the auction. The idea is that a bidder can get an item for far less than its retail value while the site operator receives a cumulative total of ‘penny bids’ that exceed the cost of the single item.

Why Penny Auctions are High Risk

Penny auctions are considered high risk for two major reasons. The first is the chargeback rate. With so many small transactions, chargebacks accumulate quickly through sheer volume. Unfortunately, customers that don’t understand how penny auctions work, or customers unhappy they lost out on an item, will frequently cancel their transaction creating a chargeback. This escalates the costs associated with chargebacks dramatically. Chargeback management is a major issue for penny auction merchant accounts.

The second factor is that many banks and institutions consider penny auctions little more than online gambling or a scam. Banks will over-protect their reputation, as their industry demands, so they will probably not do business with a penny auction website and open a merchant account.

Alternatives for Penny Auction Merchant Accounts

If you want your penny auction merchant account to be approved you’ll have to go online or offshore. Finding an experienced, reputable team is the key. eMerchantBroker for example has been rated with an A by the Better Business Bureau and is a three-time top credit card processor by Our team has years of experience finding merchant accounts for penny auction sites that are tailored. Our flat 3% chargeback rate and competitive rates will get your penny auction merchant account open and running while keeping you in business.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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