What is a Merchant Account?
It is a type of bank account for businesses that allows you to accept electronic payments such as credit and debit cards. It is a middleman between your company and individual card-issuing bank that offers your customers debit or credit cards to make purchases.
Why can’t you link your business bank with your payment processor and receive credit card sales deposits? What is the reason? The reason?
A merchant account differs from a traditional account, where money can be moved in and out. A merchant account is a relationship between a business and a Visa or Mastercard acquiring member that advances funds to the merchant from credit card transactions (less transaction fees). It is, therefore, subject to special terms and conditions. The acquiring banks have to wait for payment from the issuing bank, which occurs much later.
The funds are transferred automatically to your business account within 1 or 2 business days, even though you cannot access your merchant account. This quick authorization process minimizes delays so that you get paid faster.
What is a Business Bank Account?
Unlike a merchant or credit card account, a business bank account is the repository of all your company’s funds. This includes both cash and sales made by credit cards. It is this account that your payroll and bills will be deducted from and where your merchant account will deposit the money from your credit card purchases.
Having a local bank account is unnecessary, but there are benefits to doing so. Online or virtual banks often offer reasonable fees. The banks also provide additional services such as investment accounts and loans.
Do you require a merchant account as well as a business account?
You will need a business account and a merchant account if you plan to accept electronic payments, such as credit cards, debit cards, or gift cards.
Some services offer credit-card payment processing without opening a separate merchant’s account. Payfac is a service that facilitates payments. This service allows all merchants to be grouped under one merchant account. PayPal, Square, and Stripe are examples of such services.
Signing up for a membership is easy, but there are disadvantages.
- Transaction fees
- Longer funding times (4-8 days vs. 1-2 days)
- Limited customer service
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