Penny Auction Sites Remain Popular Despite Negative Backlash

Feb 12, 2015

Owners of penny auction merchant accounts for their auction sites are no strangers to the negative publicity that descended on the industry in 2011. Multiple reports from the Federal Trade Commission and the Better Business Bureau criticized and, more importantly, publicized the failings of the underbelly of penny auctions. Improper business practices brought about consumers complaining about a lack of transparency for greedy scam sites. Yet, time has shown eMerchantBroker that four years later penny auctions remain popular.

Perhaps one of the biggest indicators of success is the fact that after the negativity and the shut downs of scam sites, the reputable penny sites began to shine through. The extraordinary potential for cheap deals continued to bring consumers to sites. Getting a great deal gives people a natural thrill, and the gamesmanship behind landing a winning bid intensifies that feeling. Everyone wants that highlight reel catch, the pricey electronic device or jewelry at a 95% discount from the retail price. So with a majority of penny auction sites cleaning up their acts, transactions continued to flow into their merchant account.

Of course, penny auction merchant accounts are still considered high risk by traditional financial institutions. This is due, in part, to the negative publicity but also due to the customers. Many consumers bidding on penny auction sites fail to understand that each bid costs money. Most sites sell bids for auctions at $0.50-$1.00 apiece. This misunderstanding leads to disputes and chargebacks. But, these problems can be mitigated with a smart business plan. Sites that educate their customers on how the process works, and rewards them for correctly bidding maintain low chargeback rates. The savviest of penny auction sites now even offer consumers the chance to purchase the product they were bidding on at retail price minus the amount they spent bidding in case of a failed bid.

As the industry has grown out of the scam phase, the business strategies of penny auction sites have evolved as well. Penny auction merchants with a well-planned business plan are performing extraordinarily well. The upwards trend since the low-point in 2011 has eMerchantBroker positive about entrepreneurs looking to open new penny auction merchant accounts.

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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 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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