Definition: Acceptance credit, also called priority acceptance, is a letter of credit available to your bank which, if fully drawn, immediately authorizes you to take payments on specified sums of money into a specified account or with specified interest until maturity.
An acceptance credit is not an advance on the debtor’s account by the cashier of the bank for payment of unpaid bills due on that specific date, irrespective of when they were due. An acceptance credit, therefore, can be considered as a form of the advance funding and allows the debtor to obtain funds against the advances made against their account. An acceptance credit, in other words, can be treated as money used for debt repayment although only after having been advanced in advance by another party.
When you use acceptance credit, it often means that either your commercial letter of credit (if funded) or personal letter of credit has been accepted as payment by the relevant payment processor. But in some cases, it also means the merchant bank of the Issuing Bank has confirmed it has processed the payment at which point the funds are debited from your account and (usually) debited from the issuing bank’s.
Acceptance credit can be of various types. These may include insurance, personal loans, business financing, home financing, cash advances, and more. The purpose of acceptance credit is to utilize the private label letter of credit offered by a commercial lender to a private individual or business.
Acceptance credit is an alternative form of short-term cash funding or operating aid. You repay the bank by accepting its liability for short-term cash from your paycheck or from an advance from another account. An acceptance credit facility depends on the type of credit card issued, its credit limit, and maturity dates. The maturity date is a fixed feature of the business institution involved and some facilities do not require a minimum level of use.