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A merchant account is a type of business bank account that allows for the acceptance and processing of credit and debit card transactions. A merchant account is often required for various businesses, especially online operations. This account is specifically used to identify the seller as the owner of the purchase. Owner and transaction information is sent directly to the bank.
This bank account is issued by acquiring a bank for a specific provider under an agreement to process payment card transactions. Sometimes an independent sales organization, member service provider, or other payment processor enters the merchant agreement as a third party. After signing a merchant agreement, the provider is contractually obliged to comply with the regulations of card associations such as MasterCard or Visa.
Merchant Account Features
There are two main categories of merchant accounts that are typically chosen by different companies depending on the nature of their business. "Swiped" refers to transactions that require a customer to pay for their purchases in person and swipe or insert a credit or debit card. This type of merchant account is mainly used in retail. "Keyed" refers to transactions where the credit or debit card information is entered through a virtual terminal, typically over the Internet. This type of merchant account is mainly used by e-commerce merchants, but some merchants choose to use this method for in-person transactions as well because it is less expensive.
Use of Merchant Account
Similarly, since you can deposit someone else's check into a checking account, you can use a merchant account to accept card payment from a customer. Meanwhile, the merchant account does not hold any money like checking or other deposit accounts. Instead, the card payment goes through the payment gateway through the merchant account and after the funds are released, they are deposited into a checking account. It usually takes up to 48 hours from the time of the transaction for the money to be deposited into the seller's checking account. In addition, instead of receiving numerous deposits for each transaction, all payments in a business day are combined into one deposit, known as a "batch".
The merchant account can also be explained as a line of credit account since the seller is paid before the actual funds are taken from the customer. This means that the seller may be subject to a personal credit check or may be required to sign a personal guarantee.
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