What's The Difference Between Merchant Services And A Merchant Account?

What are merchant services?

Merchant services are a collection of services developed by merchant service providers designed to facilitate business transactions. Often, these providers offer a suite of solutions depending on your needs. They might include in-store credit card processing services, fraud prevention tools, and point of sale (POS) devices. 

You can think of merchant services as being holistic support for accepting payments. They go beyond merely facilitating transactions to helping you integrate solutions with accounting software and linking them to your bank accounts. Merchant service providers can get you up and running in multiple areas, including accepting mobile wallet payments, Tap to Pay on iPhone, and other payment forms, without you having to build these systems yourself. 

What is a merchant account?

Merchant accounts are a type of bank account that lets you take customer card payments. It acts as an intermediary account where funds from card transactions are temporarily held before being transferred to the business's primary bank account. Similar to that of an “escrow account” if you were buying a home. Merchant accounts are essential for businesses that want to accept non-cash payments, whether in-person, online, or over the phone. 

Customers pay using their credit or debit cards via a POS terminal or online, and the account provider holds the money for a set period. Then, if there are no problems, the funds are transferred to the business bank account. While there is a slight delay, most businesses prefer this method because it allows them to accept more customers’ money. Opening a merchant account is usually the first step to receiving more holistic and comprehensive merchant services. 

How to open a merchant account.

To open a merchant account, the first step is to submit an application to a merchant service provider. Gather the necessary documentation, including your business license, tax identification number (EIN), financial statements, and a voided business check. Submit the application, detailing your business type, expected transaction volume, and average transaction size. 

Most businesses will be approved right away, but there are some business categories that are often denied. High risk businesses have a much harder time qualifying for a merchant account if they are not working with a dedicated high-risk provider. 

How merchant services and merchant accounts work together.

Merchant services are essentially add-on services that layer on top of merchant accounts provided by banks and other financial institutions. The latter provides the ability to accept payments, while the former improves security and makes incoming funds more manageable. The best solutions work together, enhancing your experience of your merchant account. By providing these additional services, you can provide your customers with more value. Source