A merchant account is a specialised bank account that holds card revenue between settlement and payout. Card money cannot go straight into an ordinary business bank account; it lands here first. If you use a modern provider, you have one already — it was created for you at signup.
Two ways to get one
| Aggregated | Dedicated | |
|---|---|---|
| Who provides it | Stripe, Square, Paydude and similar | An acquiring bank or ISO |
| Setup | Minutes, automatic | Days to weeks, with underwriting |
| Your own merchant ID | No — you sit under a master account | Yes |
| Pricing | Published, flat | Negotiated, usually interchange-plus |
| Stability | Can be terminated more readily | More stable, harder to obtain |
| Best for | Most businesses | High volume or high-risk categories |
The aggregated model is what payment facilitators made possible. Instead of underwriting every merchant individually, the provider underwrites itself and places thousands of merchants beneath its own account, accepting the risk in exchange for speed.
How money moves through it
- The payment is authorised and captured
Funds are earmarked on the customer's card but not yet moved.
- The transaction settles
The issuing bank sends the money, minus interchange, to the acquiring bank.
- It lands in the merchant account
Held here, minus processing fees, for the length of your settlement period.
- It is paid out
Transferred to your ordinary business bank account on your payout schedule — typically T+2.
When you would want your own
A dedicated merchant account is worth the underwriting once you are processing enough that negotiated interchange-plus pricing beats a flat rate, or if you operate in a category aggregators decline. Below roughly $1M a year, the flexibility and speed of an aggregated account is usually worth more than the rate difference.
GOOD QUESTIONS
Frequently asked
Do I need a merchant account?+
You need one, but with most modern providers you do not open one yourself. Aggregators place you under their own master merchant account, which is why signup takes minutes rather than weeks of underwriting.
What is the difference between a merchant account and a business bank account?+
A merchant account is a holding account that can only receive card settlement funds. Money sits there briefly and is then paid out to your ordinary business bank account, which is where you actually spend it.
Can my merchant account be closed?+
Yes. Providers can terminate an account for excessive chargebacks, prohibited products, or a sudden unexplained change in volume. Because your revenue stops immediately if that happens, keeping a dispute rate below 0.9% and communicating large volume changes in advance both matter.
What is a rolling reserve?+
A percentage of your revenue held back for a fixed period to cover potential chargebacks. It is common for new accounts, high-risk categories and businesses that deliver goods long after payment — see the article on reserves.