High Risk Merchant Accounts
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Auction Merchant Account

Every business needs credit card processing services in order to accept credit and debit card payments from customers, but some businesses cannot get the merchant account they want easily. Penny auction sites of all kinds are considered risky by banks, and it may be difficult for these companies to obtain and maintain a merchant profile to process credit cards. On a penny auction website, users are generally expected to pay for bids during the auction regardless of whether they win or lose. In most cases, a user will pay to register for the site and will buy blocks of bids to be used in various auctions. When a user wins an auction, they have won the right to purchase the item being auctioned at the winning bid amount. Many auctions will also allow users to purchase the item at a “buy it now” price once the auction has ended. Use the tips below to ensure that the auction business will be accepted, can take credit cards, and will continue to make money.

auction merchant account


What Does A Merchant Account Services Company Do?

The merchant services company will process all credit card transactions. Everyone needs help with this because there is no way to accept credit cards online without a processor. Processors often accept applications from “traditional” businesses without doing any research. Auction sites, however, are considered to be riskier than a normal company.

A penny auction site is a unique example of the risk involved in running a business, and the tips below will help penny auction vendors or coordinators get the merchant services they need. If the business is new, it should be started with a strong foundation. If the company has been around for a long time, the owner or manager may need to change the way the business is run.


What Does A Merchant Need To Get A New Account Started?

Most businesses that want to set up an account to process credit cards will need to:

  • Present a valid government ID of some kind. The person who manages the company should do this because all the money goes into their account or the account they opened for the business
  • A voided check that shows where the money will be going
  • Three months of bank statements
  • Three months of processing statements
  • A Social Security Number or Employer Identification Number
  • A chargeback ratio of 2% or less


When a business applies, it will provide all this information to the processor. The credit card processor needs to know that the business is real, that it has valid bank accounts, and that it is operating legally. At the same time, the processor needs to know that the business does not have a history of expensive chargebacks.

Because chargebacks are such a big problem in the card processing world, businesses need to be proactive, improve their services, and ensure that they are not kicked out of a processing program because of chargebacks. Other factors also apply to the company’s application.


Why are Penny Auction companies considered high risk?

There are a couple factors that come into play with risk and auction businesses. Typically, disputes and chargebacks are the core reason they are considered high risk. Since the purchase itself is for a block of bids and not for the product itself, customers have a tendency to issue disputes more frequently if they don’t win the auction.


What Are Credit Card Processors Looking For?

Credit card processors will deny applications for merchant accounts if they see:

  • A history of expensive chargebacks
  • A low credit score
  • A negative bank balance
  • Unpaid bills or collections
  • A nominal card processing history


A business that would like to be accepted must correct any credit problems found by the processor during the underwriting process, ensure there is money in the bank, and pay all overdue bills. At the same time, the company is expected to cut back on chargebacks. Use the tips below to reduce chargebacks.


Why Are Chargebacks Such An Issue?

It costs the card processor money every time they run a card. If they need to run a chargeback, they lose money, they spend money processing the transaction, and their balance sheet looks skewed. Because of this, credit card processors often avoid companies with poor chargeback histories. A business can use the following tips to avoid chargebacks in the future:

  • Focus on customer service. It is a much better option to work out a customer issue directly than to enter into a chargeback dispute. Work with each customer, give them what they need, and ensure that chargebacks are not occurring. If there is a need for a refund, offer store credit. If the customer will accept an exchange, exchange the merchandise for something else. Businesses should not burden their credit card processors with chargebacks.
  • Create a strict refund policy. Most chargebacks can be prevented with a strict refund policy. If the company does not accept refunds after a certain time, does not accept worn or used merchandise as a return, or offers only final sales, there will be fewer chargebacks going forward.
  • Focus on selling and information. Companies that focus on educating their customers will reduce chargebacks. Companies that force customers to buy products they do not need will see a lot of chargebacks. These companies deal with “buyer’s remorse” quite often because they have not given the customer a quality experience.



Finding a company that will process credit cards can help a business sell to customers, make money, and streamline the customer experience. However, these businesses must ensure that they are not too risky for credit card processing companies. Reduce chargebacks, clean up the company’s credit, and ensure that the business has a solid financial background before applying for a merchant or card processing account. If you own and operate an auction business, contact Flow Payments and let us put our decades of experience in your industry to work for you.


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