You didn’t go into business because you love handling banking and payment logistics. However, merchant account services are a critical part of your business. With that said, here’s what every business leader needs to understand about their merchant account vs. business bank account. (Both a merchant account and a business account are required for you to accept payments from your customers!)
The Basics: What’s the Difference Between a Merchant Account and a Business Bank Account?
- A merchant account is provided by a payment processor and acts as an intermediary, securely processing customer payments through a payment gateway before transferring funds to your business bank account.
- A business bank account, offered by banks or credit unions, is essential for managing company funds, handling expenses, and paying employees, acting as the central hub for financial operations.
- Merchant accounts handle payment processing for credit and debit card transactions, while business bank accounts manage the funds post-processing, ensuring smooth financial management for your business.
Merchant Account
Merchant accounts are provided by payment processors or merchant service providers. This account is an intermediary between your customers’ payments and your business bank account.
Here’s how it works:
A customer enters their payment details on the merchant’s website or point-of-sale system. The payment gateway encrypts the payment information to ensure secure transmission and communicates with the customer’s bank (or card issuer) to validate and authorize the transaction. The bank approves or declines the payment based on factors like available funds and fraud detection.
If approved, the funds are transferred to the merchant’s account. At the end of each business day, the payment processor groups all approved transactions into a “batch.” The batch of transactions is sent to the acquiring bank (the merchant’s bank) for settlement. The acquiring bank transfers the funds from the customer’s bank (via the issuing bank) into the merchant account. Funds from the merchant account are then transferred to the business bank account.
Business Bank Account
A business bank account is a dedicated account for managing a company’s financial transactions and storing funds. Like your personal bank account, having a business bank account allows businesses to deposit and withdraw cash, issue checks, and pay bills. It’s used for managing operating expenses, paying employees, and handling other financial needs. A business bank account is provided by a bank or credit union.
Why You Need Both a Merchant Account & Business Bank Account
If your business accepts debit and credit card payments, you’ll need a separate merchant account to process those transactions. Once payments are processed, the funds are transferred to your business bank account, which acts as the central hub for managing your finances. Together, these accounts streamline your payment processing and financial management.
The Digital Evolution: Integration in Modern Business
Today’s financial technology has transformed how merchant and business bank accounts work together. Many payment processors now offer virtual terminals, mobile payment solutions, and API integrations that seamlessly connect your merchant account with your business banking operations. This technological advancement means faster settlement times, real-time transaction monitoring, and enhanced reporting capabilities. Modern businesses can track their cash flow from the moment a customer taps their card to when the funds hit their business bank account, all from a single dashboard. This integration has become particularly crucial for businesses operating across multiple channels – from brick-and-mortar locations to e-commerce platforms – as it provides a unified view of all payment activities regardless of how or where the transaction occurs.
Contact CardConnect Today
Talk to CardConnect to open a merchant account with the lowest rates today. In fact, CardConnect guarantees the lowest rates. You’ll receive a dedicated account manager and 24/7 customer support. CardConnect simplifies transaction management with our user-friendly tools. Start collecting credit or debit card payments today with CardConnect.
