Managing Chargebacks for Your Penny Auction Merchant Account

May 09, 2014

Chargebacks plague penny auction merchant accounts with a determination that can be described as dogged. Whether or not you’ve started your penny auction website already, the damage is done. Penny auction merchant accounts are considered high risk in large part thanks to the high chargeback rates that happen so frequently to penny auction companies. Effectively managing your chargebacks can help your business’s bottom line recover the damage, and money lost to chargebacks.

Why do Chargebacks Happen so Often?

Of course, as with any business dependent on electronic transactions, there is a chance of fraud. Penny auction sites experience chargebacks at a much higher rate than other kinds of online businesses. Chargebacks are so common with penny auction websites because in any given auction there’s one winner and many losers. Those who lose out on penny auctions are dissatisfied customers who are likely to try to recover the money they spent by demanding a refund and creating a chargeback.

The other common occurrence is that the customer simply doesn’t understand the function of your website and how penny auctions work. If they don’t understand the terms and conditions they may accidentally create a chargeback and, accidental or not, that’s bad for your business.

How can I Set Up a Penny Auction Merchant Account if they’re Considered High-Risk?

Most traditional domestic banks will turn your penny auction business down for a merchant account due to the risk associated with chargebacks. Yet, overseas banks and online merchant services providers can readily help you set up a merchant account for your penny auction site.

How can I Manage my Chargebacks?

The expert team at eMerchantBroker can help you find a penny auction merchant account tailored to your needs while also helping you manage your chargebacks with the eMerchantBroker Chargeback Shield. The Chargeback Shield notifies you immediately of a disputed charge and allows you to refund or contest the charge. This brings you, the merchant, back into the decision-making loop while most other merchants aren’t even aware of a chargeback until it’s too late.

Another strategy is to make sure your terms and conditions are clear so any customers on your site understand how your service operates. You may also hire a merchant account manager to help you manage your chargeback rate. Ultimately, the best approach is to be sure your penny auction merchant account provider can handle the elevated chargeback rate associated with penny auction sites.

Understanding and managing chargebacks is a fundamental part of running a penny auction website. The chargeback rates are regrettable but with effective management, you can minimize the impact they have on your business and your bottom line.



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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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