What Is the Difference Between a Merchant Account & a Regular Checking Account?

Merchant accounts take advantage of electronic transactions.

Checking accounts and merchant accounts are widely used by different types of people. Both have benefits and drawbacks. Those looking for a bank to hold their money usually use checking accounts, while business owners often opt for merchant accounts.

Identification

Checking accounts enable customers to write a check against the amount of money deposited into their account. Merchant accounts allow businesses to use bank cards and electronic funds as payment.

Function

Merchant accounts make electronic transfers of money into the account, while a checking account usually has money flowing out of it unless a deposit has been made.

Considerations

There is a certain amount of risk involved with a merchant account -- unlike a checking account, which often has overdraft protection. If a business folds, customers may not get their money back from the business owner who has a merchant account.

Benefits

Certain checking accounts earn interest on the money in the account. This process is sometimes called Negotiable Order of Withdrawal (NOW). Merchant accounts sometimes offer credit lines, which a business owner has a certain amount of time to honor.

Warning

If a person has an interest-earning checking account, he might have to pay a fee if the interest falls below the amount needed in the checking account. Those who are not considered creditworthy may have trouble getting a merchant account because of the level of risk involved with having one.

References

• Merchant Council: About Merchant Accounts
• Investor Words: Checking Account