Card processing is usually an under-the-hood event that eCommerce merchants never get involved in – that is until the ‘card transactions declined by issuer’ notification comes in. But what does this notification mean for eCommerce merchants? The rest of this post will explain what declined card transactions are and how to handle them.

A declined credit card transaction occurs when customer payments cannot be processed. Transactions can be declined for a number of reasons – the customer’s issuing bank, your  processor, or even your payment gateway. A transaction can be canceled due to technical issues at the card issuing bank, or insufficient funds on customer cards. When transactions are declined, customers usually abandon the cart which can add up to a substantial loss to the merchant.

Why do card issuers decline transactions?

There are several reasons a credit card may be declined at the point of sale by the issuer – insufficient funds, a frozen account, or an invalid credit card number or expiration date. For online purchases, invalid billing addresses and card code verifications (CCVs) could be the reason for declined transactions by card issuers.

Transactions that are declined because of an incorrect CCV or address might require voiding through the issuing bank to allow for the release of funds. When this type of decline occurs, the funds are often held until the authorization expires, which may take up to two weeks unless the merchant requests to void the transaction. In these cases, the merchant could simply ask for an alternative method of payment.

When a card is declined due to suspected fraud, the merchant receives a “Declined” or “Do Not Honor” notification inside their merchant account or payment gateway. In these cases, the merchant’s only option is to decline the card and request an alternative payment method. A 2020 study by ClearSale showed that 62% of eCommerce merchants had experienced higher false decline rates over the past 2 years – possibly as a result of the increased prevalence of automatic fraud filters.

In some cases, a credit card may be declined because the cardholder has reported their card lost or stolen. If this happens with the customer present, the merchant is required to retain the card and destroy it.

Declined transactions lead to financial losses

Declined transactions pose a financial risk to eCommerce merchants, as well as a sub-optimal customer experience. Ambiguous ‘declined transaction’ response codes increase the time required to resolve declined transactions, giving the impression of an over-zealous in their fight against fraud. Unfortunately, in most of these cases, customers end up abandoning the checkout – and it’s easy to see that a high volume of declined transactions can have a significant negative impact on profits.

Can you save the transaction after it got declined?

Unfortunately, not all transactions can be salvaged. There are two categories of credit card declines – soft declines and hard declines. Soft declines occur when the issuer approves payment, but there’s some other problem with the transaction. Usually, retrying the transaction can help salvage the situation. Hard declines, by contrast, occur when the payment is not approved by the issuing bank, so your customer will need to contact their bank to resolve the issue.

Most payment processors will offer decline codes when transactions cannot be completed, so it might be worth familiarizing yourself with the explanation for each decline code.

What to do after transactions are declined

Keep customers informed

As you can see, there are various reasons why credit card transactions are declined. To be able to offer the correct information to your customers, you should know what these reasons are and what can be done about them. Each customer experiencing a declined transaction will need to take a different action – one will need to try a different card or use a different payment method, another will need to contact their bank. Declined transactions, if not properly handled, can hurt your relations with customers as they can blame you for the issue. Also, it is important to note that excessive failed transaction attempts are likely to skew your transaction decline ratio in the eyes of your card processor.

Have customers contact their card issuers

Merchants dealing with declined transactions in a “card-present” environment will need to provide the customer with the declined code received. The customer will subsequently be required to contact their card issuer to authorize the transaction. As highlighted in ClearSale’s 2020 study, a significant number of declined transaction cases result from simple errors and overzealous fraud detection mechanisms. By contacting the card issuers, customers can simply confirm their information and receive authorization for the transaction.

Provide detailed information about declined transactions to online customers

For online customers (or “card-not-present” transactions) declined transactions can be followed by non-specific error codes such as “Transaction Not Complete” or “Transaction Error: Please Try Again.” By understanding the decline codes issued by your payment processor, you will be able to appropriately guide your customers towards completing transactions successfully. A merchant who provides a decline message with relevant details (for example, highlighting whether the decline is due to insufficient funds or an address or CVV error) provides more insight that could help to resolve the error faster.

Accept alternative payment methods

Merchants who provide their customers with additional payment options are more likely to protect their bottom line from the effects of declined transactions. Alternative payment methods such as PayPal, BitCoin, or Check21 can help customers to easily complete the transaction if the original payment method doesn’t work. High risk merchant account providers such as TailoredPay are also able to offer alternative payment methods.

TailoredPay provides payment processing services that support eCommerce merchants through declined payment transactions. With dedicated merchant support and high acceptance rates, TailoredPay offers businesses affordable, secure payment gateways and high risk merchant account solutions with a variety of payment methods. For bonus points, there are no set-up fees and approvals only take 48 – 72 hours!

So, if you’re looking for a complete payment solution that won’t hold you back, apply today and take your business to the next level.