First, let’s clarify what a merchant is. A merchant is a businessperson who trades products/services. In payment processing, a merchant is a legal entity that opts to accept payments online.
A merchant account is a type of bank account used for storing funds from card transactions until those transactions are settled completely. Thereafter, the funds are transferred to a business account.
Merchant accounts are opened at a merchant services provider such as an acquiring bank. The merchant services provider acts as a middleman between the merchant, the customer’s credit card company, and the customer’s bank, and offers a range of services such as payment processing.
Unlike a business account, the owner of a merchant account has no control over the account. It is a holding account only. Merchant banks or acquiring banks leave money from transactions in the account for a number of days, to ensure that if any chargebacks or refunds occur, the funds are readily available.