A merchant account is a relationship with a bank that allows your business to accept credit cards like Visa, MasterCard, Discover and American Express in addition to electronic checks and check-by-phone. You can accept payments for your products or services via credit card, the bank debits the funds from the customer and deposits them into your bank account.
Typically, there is a processor (3rd party) that is involved that takes the actual credit card information and transmits it to the Merchant Account Provider. This can be the terminal that you’re familiar with at retail stores, an internet based utility, website software, phone-based terminal or other software.
The actual credit card companies make money by taking a small percentage of each transaction. The 3rd party processing companies make money by charging a per-transaction fee and monthly maintenance fee.