Merchant account vs business account: What’s the difference?
- eCommerce
- International business
Why do most consumer-oriented businesses need sooner or later a merchant account?
- Receive funds through debit and credit cards
- Increase sales and global reach
- Increase customer satisfaction
We explain the differences between merchant accounts and business accounts, so that you can make a sound decision for your company’s financial structure.
Merchant account vs business account: The main differences
A merchant account and a business account are both financial tools used by businesses, but they serve different purposes.
A merchant account is a type of bank account that allows businesses to accept payments via credit or debit cards. It acts as an intermediary between the business, the customer, and the payment processor. Funds from customer payments made via credit or debit cards are first deposited into the merchant account before being transferred to the business’ regular bank account.
A business account, on the other hand, is a standard bank account used by businesses to manage their finances. It’s used for various purposes such as receiving payments from customers, paying suppliers, managing payroll, and other business-related transactions. Business accounts are typically required when opening a business, while merchant accounts are optional and are typically used by B2C businesses.
The main differences between a merchant account and a business account
| Merchant account | Business account | |
|---|---|---|
| Purpose | Allowing businesses to accept payments through various electronic payment methods, including credit cards, debit cards and online payment services | Managing the overall financial transactions and affairs of a business |
| Legal requirements | Optional | Mandatory for most business structures |
| Target market | Mainly needed for B2C, including E-commerce, gastronomy, healthcare, retail and travel sector | All business types |
| Provider | Mainly offered by banks, acquirers and payment service providers (PSPs) | Offered by bank institutions |
Advantages and disadvantages of merchant accounts and business accounts
The following sections describe the pros and cons of business and merchant accounts for small businesses.
Pros and cons of a merchant account
A merchant account allows your business to easily accept electronic payments such as credit and debit cards, making payments convenient for customers and potentially increasing sales. By accepting various payment methods, you can reach customers who prefer to pay with cards. A merchant account can enable your business to accept payments from customers around the world, facilitating global trade and tapping into new markets.
Merchant accounts often come with robust security features as well as reporting tools and analytics that provide insights into sales trends, transaction volumes and customer behaviour, helping businesses make informed decisions and optimise their operations.
On the flipside, setting up and using a merchant account comes with various fees, including transaction fees, monthly service fees, and possibly chargeback fees. With credit card payments, there’s a risk of chargebacks if customers dispute transactions, leading to financial losses and administrative overhead.
| Pros | Cons |
|---|---|
| Easy implementation | Fees apply to each transaction |
| Increased sales | Increased dispute potential with customers |
| Higher customer satisfaction | Possible technical difficulties |
| Global reach | Handling different currencies |
| Security | |
| Reporting |
Pros and cons of a business account
A business account allows for a clear separation between personal and business finances, making it easier to track business expenses, manage cash flow, and maintain accurate financial records. Depending on the jurisdiction, a business account is mandatory for various business types, as it can help comply with tax laws and regulations and simplifies tax reporting. They also offer the same security standards as regular bank accounts.
Business accounts often come with features tailored to business needs, such as online banking and mobile apps, multi-user access, bulk payments, and accounting integrations. Further, businesses may have access to credit services from the providing institution.
Beside these advantages, business accounts come with fees, which are usually higher than regular bank accounts. Companies conducting international business payments can only hold one single currency and require an additional foreign currency account, which further increases fees and the administrative burden. As a last point, traditional banks are rather inflexible when it comes to customised services.
| Pros | Cons |
|---|---|
| Separation of finances | Relatively high fees |
| Highest security | Extra foreign currency account required |
| Access to banking and business services | Inflexible services |
| Access to credit services |
amnis enhances your business and merchant account
The multi-currency business account from amnis offers the perfect addition to your business and merchant account. amnis allows you to receive and hold money from 180+ countries in 20+ currencies – no foreign currency account at your bank needed.
Companies can also pay like a local in the US, EU, Switzerland and many more countries, while avoiding the costly and slow SWIFT network. In addition, amnis’ financial ecosystem allows you to open a virtual IBAN account on your own company name and make use of physical and virtual business debit cards, with a transparent pricing system below market average.
Additional functionalities like multi-user and multi-account management, file upload and bulk payments, real-time payment tracking, cash management automations, 24/7 self-service fx hedging and rate alerts simplify and accelerate daily financial tasks in your company.
Discover the potential cost savings of amnis and all the advantages that opening a multiple-currency account can offer to your business or merchant account.