What Is a Merchant Account?
A merchant account is a type of bank account that allows businesses to accept and process electronic payment card transactions, primarily debit and credit cards.
It acts as an intermediary between the customer’s issuing bank and the merchant’s business bank account.
The funds from a customer’s card payment are first deposited into the merchant account before being transferred to the business’s actual account, typically within a few days.
This setup is essential for any business engaging in card-based or online sales.
Types of Merchants
Retail merchants
These businesses operate through physical locations, offering products directly to customers who visit their stores.
Their focus is often on creating an in-person shopping experience, with inventory managed on-site and transactions completed face-to-face.
Online merchants (E-commerce)
These sellers run their operations entirely over the internet, reaching consumers through websites, online marketplaces, or social media shops.
They benefit from broader market access and often rely on digital tools for order management, marketing, and customer support.
Mobile merchants
These are flexible, location-independent sellers who accept payments via smartphones or portable devices.
Common examples include street vendors, event-based sellers, or professionals delivering goods or services directly to the customer’s location.
Subscription merchants
Instead of one-time sales, these businesses offer products or services through recurring billing models.
Customers are charged regularly—monthly, annually, or per cycle—for continued access, making this model popular among media platforms, SaaS providers, and curated product boxes.
Service-oriented merchants
Rather than selling physical goods, these professionals provide expertise, labor, or creative output. Examples include consultants, designers, therapists, and agencies.
Their value lies in skills and experience, often delivered on a project or hourly basis.
How Merchant Accounts Work
Transaction Processing
When a customer makes a payment, the merchant account provider processes the transaction by verifying funds, checking for fraud, and authorizing the charge.
Settlement and Funding
Once the transaction is approved, funds are held in the merchant account for a short period. They are then transferred to the merchant’s business bank account, usually within 1–3 business days.
Fees and Charges
Most merchant accounts come with processing fees, including per-transaction charges, monthly service fees, and sometimes chargeback fees. These costs vary by provider and transaction volume.
Do I Need a Merchant Account?
Businesses that accept credit or debit card payments—whether online or in person—typically need a merchant account. It ensures secure payment processing and builds trust with customers.
However, some businesses may use all-in-one payment service providers like Stripe or PayPal, which offer similar functionality without a separate merchant account.
For larger operations or those wanting more control over transactions and fees, having a dedicated merchant account remains beneficial.
How Do I Get a Merchant Account?
Assess Business Needs
Start by identifying your payment needs—online, in-store, mobile, or all three. This helps narrow down suitable merchant service providers.
Compare Providers
Evaluate merchant account providers based on fees, contract terms, supported payment methods, and integration options with your existing systems.
Submit an Application
To apply, provide business documents such as bank details, tax ID, and estimated transaction volume. The provider may perform a credit check.
Underwriting and Approval
The provider reviews your business profile to assess risk. Once approved, you’ll receive credentials and can begin processing card payments through your merchant account.
FAQs
What does merchant mean?
A merchant is a person or business that sells goods or services, often in exchange for money, either online or through a physical store.
Who is a merchant in business?
In business, a merchant refers to any individual or company that offers products or services for sale to customers, typically for profit.
What is a Shopify merchant account?
A Shopify merchant account allows sellers to accept online payments through Shopify’s built-in payment system, linking transactions to their bank account.
