A process for preparing an aqueous ink-jet ink composition for MICR applications is provided comprising preparing a metal oxide pre-dispersion combined with an aqueous ink-jet ink composition, wherein the metal oxide pre-dispersion contains metal oxide pigment or particles of a very small particle size, about 0.5&mgr; or less, and exhibiting high remanence of at least 20 emu/g. The metal oxide particles may be coated with a hydrophilic coating, and the pre-dispersion may contain at least one surfactant to aid in the dispersion of the metal oxide particles. Special processing involving the use of conventional and non-conventional grinding techniques and various filtration techniques enhance the compatibility of the MICR ink-jet ink with the ink-jet equipment, resulting in superior ink life and print quality.