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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. Various businesses often require a merchant account, especially online businesses. This account is specifically used to identify the seller as the owner of the purchase. Information about the owner and transactions 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 acts as a third party in the merchant agreement. By signing a merchant contract, 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 in which a customer pays for their purchases in person by swiping or inserting a credit or debit card. This type of merchant account is mainly used in retail. "Encrypted" refers to transactions where 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, however, some merchants choose to use this method for face-to-face transactions as well because it is more cost-effective.

Utilizing merchant account
Similarly, as you are able to deposit another person’s check into a checking account, a merchant account lets you accept a card payment from a client. Meanwhile, merchant account does not hold any money like checking or other deposit accounts. Instead, card payment goes through the merchant account via payment gateway and after the funds are cleared, they are deposited on a checking account. Commonly it takes up to 48 hours from the moment of the transaction for money to be deposited onto the vendor’s checking account. In addition, instead of receiving numerous deposits for each transaction, all payments from one business day are put together into one deposit payment called a “batch”.

Merchant account can also be explained as a line of credit account due to the fact that vendor gets paid before the actual funds are collected from the customer. This means that the vendor may be subjected to a personal credit check or requirement to sign a personal guaranty.