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The Difference Between a Merchant Account and Business Bank Account

The Difference Between a Merchant Account and Business Bank Account

There’s a lot to keep up with as a business, including a long list of financial documents and tools that help you do the very thing that keeps you open: Accept payments from customers. Of course, if you’re new to the industry or trying to re-evaluate the tools and providers you’re using, you may be confused about the differences between bank accounts and merchant accounts.

Here’s what you need to know about bank accounts and merchant accounts — along with information on selecting the best provider for your company to help you meet your customer’s needs and grow your brand.

What is a Business Bank Account?

Key qualities include:

  • Deposit cash and checks from customers.
  • Expense purchases using your debit card.
  • Generate reports on revenue and expenses with ease.

Most business owners are highly familiar with bank accounts — after all, we use them in our personal lives every day. Just like in your personal life, a business bank account allows you to deposit and withdraw money, but the features of a business bank account go far beyond that of a personal bank account.

Not only are fee structures and limits different for a business bank account compared to a personal bank account, but the features also vary. Business bank accounts often make it easy for starters to create multiple debit cards for different authorized users, allowing employees to make relevant purchases. You may even set limits for these cards to ensure employees don’t overspend.

Apart from that, business bank accounts also feature in-depth reports, which can help you break down your revenue and expenditures and aid in quarterly reviews and tax filings. In general, though, you’ll find that your business bank account primarily helps you facilitate one thing: Depositing checks and accepting ACH payments from customers.

What Is a Merchant Account?

Key qualities include: 

  • Accept debit, credit, and electronic payments.
  • Move money from your merchant account into your bank account.
  • Review reports by payment method, date, and more.

If your business plans to accept credit, debit, and electronic payments, it must have a merchant account. No traditional business bank account can facilitate these things, but you need to have a business bank account, too, for cash and checks and to deposit the earnings from your merchant account.

Your merchant account is not set up like a traditional bank account. You’ll need to find a reputable merchant account provider, like LOLA POS.. Unlike a business bank account, which would have to verify every transaction as money goes in and out, a merchant account is an account or relationship with a Visa and/or Mastercard member bank.

Essentially, when a customer makes a purchase, the member bank advances the funds from the card transaction, minus transaction fees, to your merchant account. Meanwhile, the member bank has to wait to be paid from the issuing bank later. Therefore, by using a merchant account, you’re able to get paid faster rather than waiting for the behind-the-scenes verifications that the banks are doing.

Merchant accounts do have special terms and conditions, of course. For instance, even though the money may be available to you, you may have the money withdrawn from your account if a customer disputes a charge (i.e., with a “chargeback”). These are the terms and conditions you should understand when choosing a merchant account provider.

Do I Need Both a Bank Account and Merchant Account?

Almost every business should have both a bank account and merchant account to help run their company. The only reason you would not need a merchant account is if you do not plan to accept debit and credit cards or electronic payments at any time. If you are strictly cash and check business, you can go on with a business bank account.

Of course, getting a merchant account is often the next big step as a business, as more customers depend on debit and credit cards to handle their expenses. Offering electronic payment methods will create convenience for your customers. It can prove more secure since the money goes straight into your account — no checks to verify and deposit and no cash to lose.

Not only can a merchant account reduce your need to run to the bank, but it can also help grow your business assuming that you pair electronic payments with other tools, like a customer relationship management (CRM) system. Once you start accepting electronic payments, that can often be the catalyst for adopting other modern solutions which can help with customer follow-up, outreach, and earning more repeat business.

Can I Use My Personal Bank Account?

Whether or not you plan to get a merchant account for your business, you must take time to open an actual business bank account, no matter how small your company is. Even for a pass-through business, like a sole proprietorship, having a separate business bank account provides an extra layer of protection.

A dedicated business bank account also gives you access to more tools, higher deposit limits, and often lower fees for large transactions. Moreover, it makes tax filing easier since you’ll have different statements for your personal income and expenses and those of your business. Business bank accounts may also offer different rewards and incentives to benefit your company.

Opening a business bank account is typically a straightforward process. Still, you will need to verify your business ownership by providing certain documentation, like the stamped filing your Secretary of State delivered to you upon founding.

Upgrade to A Merchant Account That Works For You

Are you considering getting a merchant account for your business? Are you looking for specific features to offer convenience to your customers, like pay-by-touch and mobile terminals? LOLA POS. can help you find the best solutions for your business. We believe in offering A Merchant Account That Works For You(tm), which is why we’re staying ahead of the latest technology.Aside from offering the best in software and hardware, LOLA POS is also proud to have some of the best services in the business, with friendly agents offering personalized assistance around the clock to keep your business going. It is just one of the many ways that LOLA POS works to keep more profit in your pocket. Ready to learn more? Explore our offerings today.

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