Penny Auction Merchant Accounts Don’t Have to Cost a Pretty Penny

Don’t let your businesses industry reputation get you down. Ultimately your business is being punished by scammers running illegal operations – not you. We can still help you get a merchant account regardless of the hurdles you may have already been through.

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Get a tablet for $20 or getting a $100 gift card to a favorite shopping site for a fraction of the cost are offers that most people won’t refuse. Why would they? Placing bids on penny auction sites give customers chances to walk away with high-cost items at discounted prices.

Despite their popularity among consumers, traditional financial institutions don’t like to help high-risk businesses, such as bidding fee auctions. Like many online niche businesses, penny auctions need the capability of processing electronic payments. To easily process debit and credit card transactions, a business must obtain a penny auction merchant account. Unfortunately, due to the nature of the business, its comparison to online gaming or gambling, and the large volume of scam websites, banks don’t want to help businesses, even law-abiding merchants, that carries so much financial risk.

As a high-risk specialist, (EMB) understands the challenges that penny auction merchants face. Regardless of risk, EMB approves penny auction merchant accounts to eligible merchants. EMB offers customized payment processing solutions for all types and sizes of companies.

To begin the process, apply online now. Merchants can get approved for a penny auction merchant account in as little as 24 hours. Once approved, EMB can set up chargeback management tools and payment gateways. Also, fraud filters also can be set up for online payments.

How penny auctions work

Unlike traditional auction sites, penny auctions operate more like a lottery. Even when not engaging in fraudulent activity, penny auctions are criticized as being a form of online gambling because there is a possibility that bidders lose an exorbitant amount of money and lose an auction or win but end up spending more than the retail value.

To participate in penny auctions, customers are required to pay non-refundable fees to buy bids. Fees range around $0.60 per bid. Depending on the particular auction site that is being used, each bid can increase the price by one cent or more while also extending the sale for a few more seconds. The person holding the auction gets paid for each bid, including those submitted by losers, as well as the final price of the item that the winner purchased. For example, if the sale of an iPhone results in 10,000 bids at a fee of $0.60 each and the final cost of the phone was $750, the auctioneer gets paid $6,850. The winner of the auction pays $750 plus however many bids the person placed on the phone. If the winner placed 20 bids, the winner paid $757.50 for the phone. In addition to items costs and bids, some auctions also charge shipping, membership, subscription fees.

Types of items sold on penny auctions

EMB approves high-risk merchant accounts for penny auctions that sell:

  • Gift cards
  • Smartphones
  • Tablets
  • Televisions
  • Kitchen appliances
  • Home decorations
  • Designer clothing and shoes
  • Tools

Businesses that need to process credit card payments should fill out EMB’s online application. EMB works with new and existing penny auction businesses, merchants rejected or terminated by another credit processor, as well as those with bad credit or a history of excessive chargebacks.

What’s needed when applying for a penny auction merchant account

To obtain a penny auction merchant account, a business needs to fill out EMB’s online application. In addition to the application and a secure, operational website, merchants also must provide the following items to processors and underwriters:

  • A valid, government-issued ID, such as a driver’s license
  • A bank letter or a pre-printed voided check
  • Three months of the most recent bank statements
  • Three months of the most recent processing statements, if applicable
  • A SSN (Social Security Number) or EIN (Employer Identification Number)
  • Chargeback ratios must be under 2%

EMB can’t guarantee any approvals, but it does promise a streamlined application process, in which eligible merchant accounts are approved within 24 to 48 hours.

The underwriter’s review of a penny auction merchant account

With the scandalous reputation surrounding penny auction merchants, they need to do whatever they can to prove to underwriters that they are operating legal online businesses. The job of underwriters is to determine a merchant’s potential risk to credit card processors. Being labeled a higher risk merchant means that their a greater chance that processors and their sponsor banks will be held responsible for any fees or refunds that penny auctions are unable to pay.

Factors that determine a business’ risk include:

  • A history of high chargeback ratios
  • Bank statements
  • Credit card processing history
  • Credit scores
  • Negative bank account balances
  • Unpaid bills and late payments

One of the best ways to prepare for a review is to have the owner or the principal in the business with the best credit history apply for the account. Merchants should also pay off outstanding debts and have some money in the bank. The time leading up to the review is when businesses should be clearing up anything that looks questionable.

Getting finances in order and ensuring everything looks good is likely to increase a business’ chances of getting a penny auction merchant account approved with fewer restrictions, such as caps on higher processing volumes or a lowering rolling reserve.

Your business has unique needs, we are unique solution.

EMB will get you approved today for a low or high risk merchant account for your B2B, eCommerce, or Retail business at the most competitive rates.

Why penny auctions are considered risky businesses

The reputation of penny auction businesses and their comparisons to gambling, make them risky endeavors for banks. Some auctions sites have been sued and forced to shut down after the Federal Trade Commission determined some bidding sites were rigged. Unscrupulous bidding fee sites were found to have used bid bots, which are computer programs that automatically places on a bid on behalf of the website a visitor is using. In other instances, other dishonest sites used human shills, which are people who work on place bids on behalf of the site without disclosing their statuses to other users. For example, a bidder could be seconds away from an auction being closed with a shill comes a long and starts a bidding war to prolong the bidding and drive up the price of an item. People who get caught up in the bidding can result in spending more than an item was worth or lose track of their spending. When this happens, winners and losers end up disputing credit card transactions, resulting in hefty chargebacks.

A history of complaints about items not being the same condition or quality that they were led to believe, as well as grievances about products being shipped late or not at all also have led to many chargebacks.

Penny auctions sites also have been accused of using false or misleading language. For examples, terms, such as “bonus bids,” suggested to some site visitors that their bids were free.  On this same note, many online auction sites fail to disclose or clear state their terms and conditions about ongoing subscription, membership, and shipping fees. Many terms and conditions did not offer clear explanations that those fees were in addition to bidding costs and the final purchasing prices of items “won.”

Processors pay the price when merchants don’t maintain good chargeback ratios

Excessive chargebacks hurt the bottom lines of processors. Credit card processors terminate penny auction merchant accounts when businesses can’t maintain low chargeback ratios because they don’t want to be responsible for funds that businesses can’t cover.

Additionally, excessive chargebacks can hurt the relationships that credit card processors have with their sponsor banks and credit card brands, like Visa or American Express. Credit companies can fine credit card processors thousands of dollars per merchant that carries high chargebacks ratios.

Prevent excessive chargebacks

Most times, poor customer service, a lack of transparency and communication, and a flawed business model are the causes of excessive chargebacks, which add to merchants’ risk levels. Offering full refunds, communicating with patrons, and having a well-trained customer service team are easy ways to keep chargeback ratios below 2% and keep merchant accounts open.

Credit card processors can terminate the merchant accounts of businesses that that have more than 3% chargeback ratios. Once they have been terminated previously by processors, it is very difficult for them to get approved again in the future.

To prevent friendly fraud, merchants need to ensure they are using secure channels on their sites. Details of every transaction should be recorded, archived, and easily retrievable. Security steps should be taken to ensure that the exact date and time of the transaction, as well as the IP address of the computer from which the purchase was made is known in case a customer files a credit card transaction dispute. All of this data can be used to fight a dispute.

In addition to fighting disputes, businesses should work to prevent them. For instance, customer service representatives should be trained to offer full refunds immediately to dissatisfied customers. Considering that excessive chargebacks can result in a terminated penny auction merchant account, most find it more cost-effective to give refunds.

Since many chargebacks in the penny auction business is due to customers not understanding all of the terms and charges associated with the bidding, it is critical that merchants display clear, easy-to-understand shipping, subscription, membership, and refund policies on their sites.

Merchants also need to ensure customers know how the purchases will show up on their bills. Clearly displaying business names and contact information on all emails, websites, promotional materials, and receipts are simple ways to prepare clients for what they will see on their credit card statements.

Those that charge membership fees monthly should send customers electronic notification of the upcoming transaction. In the case of penny auctions, it is also a good way to bring them back to a site to try bidding on new items.

Clip chargeback ratios with a mitigation system

Merchants feel the financial pinch of chargebacks whether they are won or lost. Businesses that don’t take a proactive approach to chargebacks are putting their income potential and their penny auction merchant accounts at risk. Merchants that don’t maintain ratios below 2% can have their bidding fee merchant accounts terminated by processors.

Using a chargeback mitigation program, like the one offered by EMB, helps keep ratios low. EMB’s elite alert and prevention system, which was created specifically for high-risk merchants, such as penny auction businesses, can cut chargeback ratios by 25%. This means two out of every eight chargebacks can be mitigated by using system.

EMB partnered with Verifi and its Cardholder Dispute Resolution Network (CDRN) and Ethoca’s alert system to provide businesses with a system that allows businesses to resolve credit card transaction disputes directly. Working directly with banks and card issuers, CDRN allows merchants to achieve the highest rate of chargeback resolutions.

Penny auction merchant account categories to use

The United States and other countries, including the United Kingdom, assigns four-digit numerical Standard Industrial Classification (SIC) codes to businesses, including penny auction and bidding fee merchants, identifying their primary purposes.

Penny auction merchants fall into these categories:

  • 4541: Electronic Shopping and Mail-Order Houses
  • 7389: Business Services, Not Elsewhere Classified

Visit the United States Department of Labor to view a complete SIC list.

Federal statistical agencies classify establishments using a list of six-digit numerical codes, which are known as the Northern American Classification System (NAICS). The codes are used to collect, analyze, and publish statistical information about similar types of businesses and how they impact the economy in the U.S.

These merchants use the following NAICS codes:

  • 454111: Electronic Shopping
  • 454112: Electronic Auctions
  • 561990: All Other Support Services

Visit the United States Census Bureau’s Northern American Classification System to view the complete NAICS code list.

We Approve Penny Auction Businesses

Penny auctions are an online niche that nonetheless require electronic payment processing. Penny auctions are deemed high risk, almost on par with gambling, due to scam websites and businesses seeking to take advantage of consumers.

Don’t let your businesses industry reputation get you down. Ultimately your business is being punished by scammers running illegal operations – not you. We can still help you get a merchant account regardless of the hurdles you may have already been through.

eMerchantBroker knows the difficulty your startup or small business is facing as a penny auction site. We know your penny auction business absolutely requires electronic card payment processing and we’re here to get you approved.

We can find you the perfect, high volume merchant account for your penny auction website. If you can keep your chargeback rate below 3% we can set you up with a merchant account in as little as 3 days.

Ready to get started?

At EMB, we’ve done our diligence. Using our company’s combined experience as industry leaders and our extensive and diverse portfolio of merchants, we’ve learned the ins-and-outs of each business type we work with. We take time with all of our customers, one-on-one, to assist them with their application process, and listen to the challenges they’ve faced with other providers. Using this information, we arm our large network of agents, support staff, and leverage our strategic partnerships to offer the best pricing and merchant experience in the industry.

Competitive rates and a user-friendly application process ensures your business a new merchant account in the most efficient fashion possible.

Apply Now

Penny Auction Websites – Approved at

eMerchantBroker knows the difficulty your business is facing, we Can Help. Don’t let your businesses industry reputation get you down. Ultimately your business is being punished by scammers running illegal operations – not you. We can still help you get a merchant account regardless of the hurdles you may have already been through. If you can keep your chargeback rate below 3% we can set you up with a merchant account in as little as 3 days.

  • No Application Fees
  • Competitive rates
  • No VISA/MasterCard Required
  • Secure Payment Gateway

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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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