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Merchant Accounts vs Business Accounts

While they're similar, there are some crucial differences to remember 

Though the two are often confused with one another, there are several differences between merchant accounts and business accounts. If you're struggling with understanding what sets them apart, this article will help you get a firmer understanding.

 

When you want your business to start accepting card payments, you'll likely need both a merchant account and a business bank account. The two are linked, which leads many to think they're synonymous, but they're not.

What is a Merchant Account?

When you accept a card payment the bank that issued the customer's card sends the funds from their bank account to your merchant account. The bank that provides you with your merchant account then sends the money from your merchant account to your business bank account. 

 

In simple terms, a merchant account acts as a middleman between your business bank account and the bank account that belongs to the customer making the purchase. Where a business bank account holds your funds, a merchant account's role is to just process them.  

What is a Business Bank Account?

As you've just read, a business bank account is the final destination of your business's money. The money arrives after first leaving your customer's bank account, being processed by your merchant account, and then being sent from your merchant account to your business bank account.

 

Once the money from a sale ends up in your business bank account, you can then spend it where it's needed. 

What's the Point of a Merchant Account?

While it seems logical to accept payments directly into your business bank account, cutting out the middleman and saving time, it would actually cost time in the long run. Merchant accounts work because the bank that provides them is able to advance you the money you get from sales before the payment is fully completed. 

 

The payment a customer makes to your business has to go through checks at their end before their bank releases the funds, which can take days. So while merchant accounts add an extra step, they mean your business has much quicker access to its funds than it otherwise would.

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  • Barclays Bank PLC
  • FirmEU BV
  • Fiserv (Europe) Limited
  • Handepay Limited
  • Inspire Payment Services Limited
  • ResQ Limited
  • Seymour Direct Limited
  • SumUp Payments Limited
  • Take Payments Limited
  • The Redwood Group and Associates Limited
  • Tide Platform Limited
  • WorldPay (UK) Limited
Our Products
  • Business Accountancy
  • Business Epos Systems
  • Business Telephone Systems
  • Commercial Waste Collection
  • Digital Marketing
  • Fleet Tracking
  • Invoice Finance
  • Merchant Accounts
  • Website Design

How do Merchant Accounts Compare to Business Bank Accounts?

As you've read, merchant accounts work wholly differently from business bank accounts and they're not to be confused with one another.

 

Both can prove invaluable to your business by offering different kinds of benefits. A business bank account gives you access to the money your business makes and allows you to save or spend it how you choose. This is not a function provided by merchant accounts, which prove their worth in other ways.

 

Ultimately, the two types of accounts are designed to work together, with the benefits of one playing into the benefits of the other. This is the reason that many businesses across the UK opt to use them in conjunction with each other, and also the reason why your business should consider doing the same. 

FAQs

Your Questions Answered

Though the two are often confused with one another, there are several differences between merchant accounts and business accounts. 

 

A merchant account acts as a middleman between your business bank account and the bank account that belongs to the customer making the purchase. 

A merchant account is a special business bank account that allows you to accept credit and debit payments. It acts as a middleman between your business and the bank that provides your customers with their credit or debit cards. 

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The Best Card Machines For Small Businesses 2024

If your business still operates a cash-only policy when it takes payments, or you're looking to upgrade the cash machines you've already got, choosing the right card reader for your business can be a trickier job than it sounds.While card machines aren't the most glamorous thing to spend your money on, they are an essential part of your business. Recent years have seen them grow in popularity and now many people use their cards to pay for the vast majority of their goods and services. You, then, need a reliable, useable, and cost-effective card machine to ensure your business is not only able to take payments by card but also take them quickly and easily with a device you understand.  The Best Card Machines for Small BusinessesDifferent machines offer your business different benefits, and knowing which is the best choice isn't always clear. That's why we've done most of the research for you, and compiled this list of some of the best card machines on the UK market. We've compared them, so you don't have to. As you're probably aware, card machines come in a variety of shapes and sizes. Some are portable and pocket-sized, while others are large and fixed to your business's countertop. We've covered all bases in this list, so you'll find a mix of different types of card machines. 

How Much Do Business Bank Accounts Cost?

What is a Business Bank Account?Business bank accounts enable you to separate your personal and business expenses; creating a convenient way to organise your tax and bookkeeping. This makes paying taxes easier and means your files are clear and easy to understand. There are several advantages to having a business bank account. For a deeper dive into what a business account can offer you and your business, read on. In this article, we outline the costs associated with opening and maintaining a business bank account and explain what you need to get started. How Much Does A Business Account Cost?Each bank has its own set of criteria for opening a business bank account. It's important to evaluate and compare the available options to find the best business checking account that suits the needs of your business. If you already have a personal account with a particular bank, there might be special offers or benefits available to you if you choose to open a business bank account with the same one. Some banks require an initial deposit or a minimum balance, while others impose varying fees for different types of transactions, such as monthly service fees, excess transaction fees, or cash handling fees.

Direct Debit Explained

A direct debit payment is a payment taken automatically from a customer's bank account periodically. It's often offered as a payment method by businesses that provide subscription services or other services that require an ongoing commitment from a customer. The main benefit of direct debit payments, for businesses and consumers, is their simplicity. Neither your business nor the customer has to worry about remembering the payment, so payments aren't missed and the relationship between you and your customers is more easily managed. How to Take Direct Debit PaymentsThe way direct debits work is fairly simple. Your customer's payment is taken from their account automatically, usually on a predetermined date, and your business then continues to provide the customer with your service. You need an agreement from your customers to take payments automatically, so make sure it's clear what they are opting in for. You don't want your customers to be confused about what it is they've committed to.  You also need to be eligible to take direct debit payments, which means you need to get a Service User Number (SUN) - a six-digit number businesses use to get paid via direct debit. You can get a SUN directly from your bank, provided you meet its criteria.  Once your bank and your customers have given you the green light to take payments automatically, you just need to set up the frequency and size of your payment. The most important thing to remember about this part is that your customers must be given 10 days' notice before each payment is taken. The notice needs to detail when the payment will be taken and how much it will be. Benefits of Taking Direct Debit PaymentsAs mentioned above, the most obvious benefit of accepting direct debit payments is the simplicity it brings to the hassle of keeping on top of recurring payments. That's not where the benefits of direct debit payments though. Other benefits include having greater predictability, greater retention, and better relationships with your customers. Having a better idea of exactly how much revenue you've got coming in from your customers and knowing exactly when you'll be receiving it can make your business's general finances more predictable and therefore more manageable. You can also use this information to inform future decisions about your business growth.  Having customers committed to your business on an ongoing basis also means they're more likely to stick around as they already know they like what you provide, making the job of your CRM that much easier.  With customers already engaged heavily with your business and your brand, they're right where you want them to be to develop your relationship with them. You can use their pre-existing interest to market more of your services, offer special discounts or offers, or reward their loyalty with a giveaway. These things will help keep their engagement with your brand nice and high.