Merchant Account vs. Business Bank Account

Credit card and checkbook

If you're just setting up a business, it can be confusing figuring out how to process credit card payments, deposit cash, and pay your bills. For most businesses, this means having two distinct types of accounts — a merchant account for your credit card transactions and a traditional bank account for your cash deposits and operational expenses.

What Is a Merchant Account?

A merchant account is a special type of business bank account that allows you to securely accept credit, debit, and other electronic payments. It acts as an intermediary between your business and the individual card-issuing banks that offer your customers the credit or debit cards they use to make purchases.

You may be wondering why you can’t simply link your business bank account with your payment processor to receive your credit card sales deposits. The reason? There would be long delays as your bank and customers’ card-issuing banks verify each transaction before authorizing the sale.

A merchant account is not like a traditional bank account where money is moved in and out. It’s a business account/relationship with a Visa and/or Mastercard acquiring member bank that essentially advances the merchant the funds from the credit card transactions they accept (less the transaction fees) and is subject to specialized terms and conditions, as a result. The acquiring banks wait to get paid from the issuing banks, which happens at a much later time.

Although you can’t actually access your merchant account, the funds acquired from the issuing bank are automatically transferred to your business bank account on average within 1-2 business days. This fast authorization process helps minimize delays, so you get paid quicker.

What Is a Business Bank Account?

Unlike a merchant account, a business bank account is a repository for all of your company funds, both cash and credit card sales. This is the account from which payroll and bills are deducted and into which your merchant account deposits the funds from your credit card sales. Bank accounts don't have to be local, although there are some advantages to supporting your fellow local financial institutions. You can often find good fee structures by using a virtual, or online, bank. Banks also offer additional services, such as loans and investment accounts.

Do You Need a Merchant Account and a Business Bank Account?

If you want to accept any type of electronic payment – credit card, debit card, gift card – then you’ll need both a merchant account and a business bank account.

There are services that provide credit card payment processing without the need to apply for a separate merchant account. This is known as a payment facilitator service, or Payfac. With this service, all merchants are boarded under one main merchant account. Examples of these include PayPal, Square, or Stripe.

*Although sign up is simpler, you may encounter disadvantages like:

  • Higher transaction fees
  • Longer funding times (4-8 days vs 1-2 days)
  • Limited customer service

By comparison, an all-in-one merchant account takes care of payment processing, hardware, and support all under one roof.

Looking to Apply for a Merchant Account?

With our advanced credit card processing solutions, we can help you accept payments the way your business needs to. To learn more, schedule a free appointment with a payments expert today for your:

Small Business

Large Business

* “What Is a Merchant Account?” BluePay