A merchant account is a specific type of bank account that allows businesses to accept payments from their customers using a debit or credit card. In other words, a merchant account is an agreement between three parties: a retailer, a merchant bank, and a payment processor for the purpose of processing credit and debit card payments. When a customer pays for their purchase with a credit or debit card, the money is first deposited into the merchant's account and then further transferred to the company's bank account. The transfers to the bank account are usually organized on a daily or weekly basis.

Types of Merchant Accounts
There are different types of merchant accounts, which typically fall into two categories, and the description of each type gives a pretty clear overview of which ones are best for your business. The main categories of a merchant account are stolen and encrypted.

A swiped merchant account is typically used when a business meets its customers in person and during that meeting a customer can swipe their card to pay for the products and services. This type of merchant account is usually further described in relation to the use of said account:

Retailers – conduct transactions in a retail environment. The customer's card is swiped through a terminal and typically a signature or PIN code is captured;
Wireless / Mobile – similar to retail, but in a wireless environment with a mobile device. An example of such a trader would be a taxi driver or a pizza delivery man;
Restaurant - similar to retailer, but with additional function - possibility of adding tips. Corresponding to the name of this type of merchant account mainly used by restaurants and cafes;
Accommodation – similar to retailers, but the company can adjust the payment amount according to the additional fees. This type of merchant account is used by hotels and bed and breakfasts when a customer has used a minibar or other extras.
Encrypted merchant accounts are used when loyalty card information is taken over the phone or internet (or sometimes even in person) and entered by the employee themselves. While this merchant account application takes more time and is less convenient, it is also less expensive than the merchant accounts discussed previously.

Internet or e-commerce merchant – for companies that operate through a website and use the Internet payment gateway service to collect and process the customer's card information accordingly;
Postal and telephone ordering - the customer's card information is transmitted by telephone, post or Internet and processed manually either via a credit card machine or a virtual terminal;
Face to face - this type of merchant is similar to a wireless/mobile hacked merchant account, but instead of investing more money into acquiring a mobile device, it is possible to take the necessary information from the customer and enter it over the phone.
Pros and cons of a merchant account
While choosing the most appropriate type of merchant account for the intended application is crucial for the best experience, there are some general pros and cons that need to be discussed.

Advantages:

Increase in sales - through greater convenience compared to check or cash payments;
Faster transactions;
Security – no risk of theft or accidental mistakes by employees when working with cash;
More choice – the more payment options you offer your customers, the more convenient it is for them to shop from you;
Ability to accept credit or debit cards in multiple currencies.
Disadvantages:

Costs – typically a business has to pay for each transaction;
Delay – customer funds are deposited into the merchant account first and transferred to the commercial bank account later;
Fraud – there is always a risk of identity theft or internet fraud;
Chargebacks – It's easy for customers to request a chargeback, especially when the money is still in the merchant's account.