Merchant account

Sara Heegaard March 3, 20221 minute read

Sara is a copywriter focused on lifting up Recharge's merchants, partners, and their customers. Before Recharge, her past lives included writing and editing at four different subscription... Full bio

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.