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What is a merchant account, and do you need your own in Canada?

A merchant account is the account your card sales pass through on the way to your bank. Some providers set one up for you. Others, like Square and Stripe, let you sell under theirs.

Prices checked October 19, 2026 From providers' own sites

The short answer

A merchant account is the account your card sales pass through before the money reaches your business bank account. Every card payment needs one somewhere in the chain.

For a small business in Canada, the real question is whether you need your own merchant account, or whether you can sell under someone else’s. Square and Stripe let you do the second.

What a merchant account is

Authorize.net, a payment gateway, describes a merchant account as “a special kind of bank account” that lets a business accept card payments. It says “The bank where you have your merchant account is called the acquirer, or merchant acquiring bank” (Authorize.net).

Here’s what happens with each sale:

  1. Your customer pays by card.
  2. Their bank, the card issuer, approves the payment.
  3. The money moves through the card network to your acquirer, into your merchant account.
  4. It’s paid out to your regular business bank account.

Payout speed varies. Helcim lists next-business-morning deposits. Moneris says you can “see the balance in your account the very next day,” working with BMO and RBC. Stripe pays out in 3 business days by default in Canada, after a first payout of 7 calendar days.

Two ways to get one

1. Your own merchant account

A processor opens an account in your business’s name. You apply, and the provider decides whether to approve you. You sign a processing agreement with it.

2. Selling under a payment facilitator

A payment facilitator, or payfac, holds an account with the banks and signs up lots of small businesses under it. Stripe says payfacs “maintain a master merchant account and let submerchants use this account,” and that “Stripe operates as a payfac, allowing businesses to accept payments without setting up a traditional merchant account” (Stripe).

Square says the same in its Canadian terms: “Square is a payment facilitator and acquirer that allows you to accept Cards.” It also says “We are not a financial institution as defined in the Bank Act (Canada)” (Square Canada Payment Terms).

What changes for you

Who you deal with. With your own account, you deal with your processor. With a payfac, you deal with the payfac, and you agree to its terms.

Holds on your money. This is the catch to read for, whichever model you pick. Square’s Canadian terms say “We may withhold funds by temporarily suspending or delaying payment of Proceeds to you,” and that Square may “defer payout or restrict access to your Proceeds” for listed reasons (Square Canada Payment Terms). Find the holds and reserves section of any provider’s terms before you sign.

Pricing. Square and Stripe charge a flat rate with no monthly fee. Square lists 2.5% for in-person credit cards. Others publish interchange-plus pricing: Helcim’s markup is 0.40% + 8¢ per in-person payment for businesses processing up to $50,000 a month, and Clearly Payments lists 0.38% + 8¢ for $150,000 to $300,000 a year in card sales. Our interchange-plus vs flat rate guide shows which wins for your sales.

Your rights under a processing agreement in Canada

Canada has a Code of Conduct for the Payment Card Industry, overseen by the Financial Consumer Agency of Canada. FCAC says it was introduced in 2010 and revised in 2015 and 2024 (FCAC). Here’s what FCAC says merchants get under it (FCAC):

  • Notice of fee changes. Acquirers and their partners “must notify their merchants 30 to 60 calendar days before the effective date” of a covered fee change.
  • A way out without penalty. You have “the right to provide notice of your intent to exit the agreement without penalty,” if you give notice within 70 calendar days after the fee change takes effect.
  • A clear monthly statement. Every month you must get or have access to a statement showing your effective merchant discount rate, the rates and totals for charges, and transaction counts.
  • A summary box. Agreements must start with a cover page, including a “Summary of the Key Elements of the Agreement.”
  • Shorter renewals. “Your agreement may be converted to automatically renew for periods of 6 months or less.” You can decline renewal at least 45 calendar days before the term ends.
  • A complaint process. Your processor must have one.

FCAC also says it “does not resolve individual disputes and does not provide redress or compensation.” If you have a problem, start with your provider.

The effective merchant discount rate on that statement is the number to watch. It’s your total fees divided by your card sales. Our fee calculator works it out for you.

Which one should you choose?

Start with how you sell:

  • New, small or uneven sales: a payfac with a flat rate and no monthly fee is the simplest start.
  • Steady volume: price interchange-plus too, and compare the effective rate, not the headline.
  • Already have an agreement: check whether you qualify for lower credit card fees from the 2024 cut with our fee-cut checker.

Keep reading

Common questions

What is a merchant account?

It's a special kind of account that lets your business accept card payments and holds the money before it moves to your regular bank account. The bank or company that holds it is called the acquirer. Some providers open one in your business's name. Others, called payment facilitators, let you sell under their own account instead.

Do I need a merchant account to take cards in Canada?

Not one of your own. Payment facilitators let you sign up and sell under their account. Square's Canadian terms say Square is a payment facilitator and acquirer that lets you accept cards. Stripe says it operates as a payfac, letting businesses accept payments without setting up a traditional merchant account.

What rights do I have under a card processing agreement in Canada?

Under the Code of Conduct for the Payment Card Industry, FCAC says you must get 30 to 60 days' notice of covered fee changes. You can then exit without penalty if you give notice within 70 days after the change takes effect. Each month you must get a statement showing your effective merchant discount rate.

Can Square or Stripe hold my money?

Yes, under their terms. Square's Canadian payment terms say it may withhold funds by temporarily suspending or delaying payment of your proceeds, and may defer payouts or restrict access to them for listed reasons. Read the holds and reserves section of any provider's terms before you sign, whichever model it uses.