A method for processing a payment transaction via a proxy guarantor includes: receiving a transaction request between a user and a merchant including payment device data associated with a payment device of the user of a payment type not accepted by the merchant, and an indicator causing the payment transaction to be processed as a proxy guarantor transaction; identifying a guarantor associated with the user having a payment device of a payment type accepted by the merchant; communicating an authorization request to an issuer system associated with the guarantor to cause the issuer system of the guarantor to authorize the payment transaction; receiving an authorization response from the issuer system of the guarantor, the authorization response including a payment transaction approval indicator; and communicating a settlement request to an issuer system of the user.