What is a merchant account?
A merchant account is a type of commercial bank account that enables businesses to make, accept, and process credit and debit card payments. Once a customer makes a purchase, the funds are initially deposited in the merchant account before eventually being transferred to the business bank account.
In order to offer electronic payment options and open a merchant account, a business owner must make an agreement with a merchant acquiring bank. Terms of the agreement often include costs per transaction charged by the bank, the card processing network of the bank and associated fees, and any other recurring fees charged by the bank.
Types of merchant account providers
Merchant account providers generally fall into two categories: traditional merchant accounts, and payment service providers (PSPs). Payment service providers allow businesses to accept online payments without setting up a merchant account. This option allows businesses to start accepting electronic payments more quickly, but it can also be less customizable, and may not allow price negotiation with the terms of agreement. Examples of PSPs include PayPal, Stripe, and Braintree.