Merchant Account Guide

Everything you need to know about merchant accounts

What is a Merchant Account?

A merchant account is a special type of bank account that allows businesses to accept credit and debit card payments. It's essentially a holding account where funds from card transactions are deposited before being transferred to your regular business bank account.

Think of it as a middleman account that handles the complexities of card payments. When a customer pays with a card, the money goes to your merchant account first, then (usually 1-3 business days later) gets transferred to your regular business checking account.

Merchant Account vs Payment Processor

This is a common source of confusion. Here's the difference:

Merchant Account

A bank account that holds your funds. You need this to accept card payments.

  • • Holds your funds
  • • Requires application
  • • May have contracts

Payment Processor

The technology that processes transactions. Connects your business to the card networks.

  • • Processes transactions
  • • Provides API/software
  • • Handles security

All-in-One vs Separate Accounts

All-in-One Solutions (Stripe, Square, PayPal)

These processors provide both the merchant account and payment processing in one package. You don't need to apply for a separate merchant account - it's included.

Pros: Easy setup, no separate application, no contracts
Cons: Less flexibility, may have account holds

Separate Merchant Account (Authorize.Net, Traditional Processors)

You apply for a merchant account separately, then connect it to a payment gateway/processor. More traditional approach.

Pros: More control, potentially better rates, less risk of holds
Cons: More complex setup, may require contracts, longer approval process

How to Get a Merchant Account

1. Choose Your Approach

Decide between an all-in-one solution (easier) or a separate merchant account (more control). For most small businesses, all-in-one is the better choice.

2. Gather Required Information

You'll typically need:

  • • Business information (EIN, business type, industry)
  • • Bank account information
  • • Business license (if required)
  • • Processing history (if switching)

3. Complete Application

Fill out the application with your payment processor. For all-in-one solutions, this is usually quick and can be approved in hours. For separate merchant accounts, it may take days or weeks.

4. Approval and Setup

Once approved, you'll receive account details and can start processing payments. You may need to verify your bank account before receiving funds.

Key Considerations

  • • Reserve Accounts: Some processors hold a percentage of funds as a reserve, especially for new or high-risk businesses
  • • Contracts: Traditional merchant accounts often require contracts with early termination fees
  • • High-Risk Industries: Some businesses (adult content, gambling, etc.) may have difficulty getting merchant accounts
  • • Monthly Minimums: Some merchant accounts require minimum monthly processing volumes