TL;DR
A merchant account holds card payment funds temporarily between the customer's bank and your business.
A business account is your primary trading account used to hold cash balances, settle invoices, pay utilities, and manage daily business outgoings.
Traditionally, you needed both separately: your payment processor provided the merchant account, and your bank provided the business account.
Teya combines both: card payments settle instantly into your Teya Business Account. Your funds are accessible in real time with no intermediate clearance delay and no monthly account fees.
Picture this: you've been running a clothing boutique in Manchester for four years. You're about to open a second location, and before you sign anything, you sit down to review your monthly outgoings.
On one statement: a monthly fee from your payment processor in a merchant account, plus a percentage on every card transaction. On another: a monthly fee from your business bank, plus charges for every bank transfer. Two separate providers, dual fee structures, separate dashboards, and your revenue still takes up to three working days to clear from one to the other.
Based on this problem, let's look at the structural differences between a merchant account and a business bank account, and whether you actually need to maintain both as an established SME.
What a merchant account includes
A merchant account is a holding account that sits between a customer's bank and yours. When a customer pays by card, the payment does not go directly to your bank account; it goes to your merchant account first. Your payment processor holds it there while the card network verifies the transaction, processes any reversals or chargebacks, and confirms that funds are clear.
Once that verification window has passed, usually one to three business days, the funds are released and transferred to your business bank account. The merchant account itself isn't where you log in to check a balance; it's part of your payment processing infrastructure.
Merchant account fees typically include a percentage of each transaction (the merchant service charge), monthly account fees, PCI DSS compliance fees, and sometimes separate charges for chargebacks. These fees are set by your payment processor, not your bank.
What a business bank account does
A business bank account is where your money actually lives. It is the account your suppliers invoice to, from which you pay wages, rent, and HMRC, and from which your accountant pulls statements. It holds your trading balance and gives you access to banking features: debit cards, direct debits, bank transfers, and in some cases, overdraft facilities.
A business bank account from a traditional high-street bank cannot process card payments on its own. It receives funds that have already been processed, but the processing itself happens through the merchant account layer.
How funds move from a merchant account to a business bank account
The standard flow looks like this: customer taps card → transaction hits your card machine → payment processor captures funds into the merchant account → processor releases funds after the settlement window → funds land in your business bank account.
That final step, release and transfer, is where the delay happens. The settlement window varies by provider: some release daily, others on a two- to three-business-day cycle, and most do not settle on weekends. For a retailer processing £20,000 a week in card payments, that delay means £40,000 to £60,000 of earned revenue is perpetually in transit.
Teya removes that delay by settling directly into the Teya Business Account instantly, including weekends and bank holidays. There is no intermediate merchant account sitting between your card machine and your trading balance.
If you integrate your card payments and our business account, Saturday's takings land in your account in seconds. Learn more in our article about instant settlements.
What each account actually costs
Traditional merchant accounts carry a merchant service charge (typically 0.3% to 2% per transaction, depending on card type and agreement), monthly account fees (£10 to £40 is common), PCI DSS compliance fees (often charged monthly whether or not you're compliant), and chargeback administration fees.
Traditional business bank accounts at high-street banks typically charge a monthly fee (£5 to £25 for basic accounts), plus per-transaction fees for cash handling, bank transfers, and sometimes BACS payments. Some offer a free introductory period for new businesses before fees begin.
The combined cost of running both accounts separately typically runs to £50-£100 per month before transaction-based fees. For a business processing high card volumes, the transaction percentage across both layers accumulates quickly.
Can a business bank account accept card payments directly?
A standard business bank account cannot accept card payments on its own. To process card payments, your business needs a merchant account from a payment processor. The bank account receives funds that have already been processed, authorised, and settled.
The exception is when your payment provider and banking provider are the same entity, or when a combined product combines both functions. In that case, card payments are processed through the payment infrastructure and settle directly into the account, with no separate merchant account sitting in between.
The Teya Business Account is free of monthly management fees as long as your payment processing with us remains active. It consolidates business spending features, including:
a physical Visa Platinum debit card,
up to 10 free virtual cards,
30 fee-free ATM withdrawals per month,
and cash deposit access via over 29,000 UK PayPoint locations, with real-time payment settlement.
Do you need both a merchant account and a business bank account?
Traditionally, yes. If your payment processor is separate from your bank, you need both products and will pay for both. If you switch to a provider that wraps payment processing and business banking into one platform, the traditional merchant account layer disappears — and so do the fees attached to it.
For a high-street SME looking to simplify before opening a second location, that consolidation is worth calculating in real terms: how much you're paying across both accounts today, versus what a combined setup would cost.
Request your Teya business account for free and see how you can simplify your payment operations with our features.
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