What is a merchant account?

Point of Sale (POS) Glossary

A merchant account is a payment processing service that a business uses in the electronic payment transaction process. These accounts facilitate accepting credit cards, debit cards, and other types of electronic payments that are presented at a point of sale terminal in a store.

When a customer’s transaction is processed at the POS, the merchant account acts as a middle man to negotiate the transfer of money from a customer’s account to a business bank account. Services such as Paypal act as both a merchant account and bank account and are not merchant accounts.

In order to accept electronic payment transactions, a business will usually need a gateway that does the initial authorization of a transfer. This information is later sent to the merchant account (sometimes known as a credit card processor) that settles the transactions. If the transaction is confirmed, the money is sent to the merchant’s bank account.