The underwriting of merchant accounts for credit card acceptance is done by banks that are members of the Credit Card Associations of Visa and MasterCard. The underwriting process consists of evaluating the risks, associated with allowing a merchant to accept credit cards through a detailed analysis of the applicant organization's credit history and the business' previous processing history (if applicable). Just as with a personal or a business loan, banks want to make sure that applicant organizations are responsible entities, because, in effect, a merchant account service is a form of credit. When a merchant receives a card payment, it is authorized cleared and settled by the merchant processing bank. At the end of the business day the processing bank receives the transaction information and funds the amount, after subtracting its processing costs, into the merchant's bank account. Then it waits for the card issuing bank to remit the payment amount. At this time, if the card issuer or there cardholder disputes the transaction initiating a chargeback, or if it turns out that the transaction was fraudulent the processor may never receive its money. In addition, if a merchant generates a consistently high level of chargebacks (over 1%), the Credit Card Network will assess fines on the credit card processing company that has underwritten the account.

Merchants usually receive there processing service from Independent Sales Organizations (ISO). These are licensed by the Credit Card Networks and have relationships with merchant processing banks. Once a processing agreement is signed, the processing bank, also known as a merchant bank or acquiring bank commits to acquiring the merchant's card transactions and funding the transaction amount minus the processing costs. Processing banks are usually card issuers as well.