Merchant Account vs. Bank Account

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

About Merchant Accounts

Merchant accounts are contracts between a retailer and a credit card processing company or a bank. The merchant account acts as an intermediary between the retailer and individual credit card sponsoring banks. Such accounts make it easy for retailers to accept credit and debit card payments, without having to worry about security or fraud. Many merchant account vendors now also offer mobile credit card processing. This enables retailers to get out from behind the sales counter to where their customers are — at farmers' markets, fairs and even the street.

Merchant account vendors charge a fee per credit card transaction for processing the sale and transferring the funds. They validate the card and make sure that the card has enough credit to pay the charge. They then deduct the amount of the sale from the cardholder's account and deposit the funds in the retailer's account, usually within one to three days.

Having a Merchant Account vs. Bank Account

Unlike a merchant account, a 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 businesses. You can often find good fee structures by using a virtual, or online, bank. Banks offer additional services, such as loans and investment accounts.

Most businesses need both a merchant account and a bank account. A set-up with a gateway like PayPal can rack up costly fees when you need to access cash. By comparison, an all-in-one merchant account, such as one from BluePay, takes care of payment processing services all under one roof, with lower fees than a traditional credit card company. 

BluePay Processing, LLC is a registered ISO of Wells Fargo Bank, N.A., Walnut Creek, CA, U.S.A.
BluePay Canada ULC, is a Registered ISO/MSP of Peoples Trust Company, Vancouver, Canada.