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5 reasons card issuer rejections occur (and how to manage them)

sticky.io

Updated:  

June 10, 2024

Learn the solutions for common payment declines to make more sales, reduce churn and keep your hard-earned customers happy.

Ecommerce shopper getting their payment declined.

If you think the worst thing about a declined transaction is the purchase you’ve just lost, you could be in for a harsh surprise. Failed payments disrupt the subscriber relationships companies like yours rely on. They can cause late or missed shipments that erode subscribers’ trust — and that may make them question whether it’s worth keeping a subscription.

Two Types of Declines

Credit card payment failures can be sorted into two categories: hard declines and soft declines.

Hard declines are permanent payment failures: Retrying these transactions on the same card won’t result in payment success. You’ll need to get new payment details from the customer.
Soft declines are temporary payment failures: If you can pinpoint the error behind them, you can take steps to overcome it and likely see the transaction succeed.

Subscription merchants can reduce the likelihood of this occurring in two ways: First, by implementing decline management processes to cut down on payment failures. And second, by automating alerts or creating another system that communicates errors to customers in time for them to update their payment information.

Now that you know the basics of decline management, it’s time to think about how you’re going to implement it into your ecommerce store. Get to know these top reasons ecommerce merchants see credit card issuer rejections — and the strategies that work to combat each.

Reason 1: Incorrect Credit Card Details

One of the most common reasons payments fail, and thankfully one that’s easy to fix, is a simple transposition or typo in a shopper’s billing information. An incorrect account number or CVV code is sure to trigger a rejection because the card issuer won’t be able to match the input to an account in its system. This is a hard decline, meaning customers will need to correct their payment information or provide a different method of payment.

How to fix it

By simplifying the process to correct the error, you’ll see fewer customers bounce when they’re hit with this type of declined payment. Be specific about why the payment failed: Your error message should specify whether the credit card number itself was wrong or if the CVV was rejected, and so on. Customers will feel like they have more control over the payment process when they know what’s happening, and they’ll know which part of their billing details to double-check (and correct) before they try again.

Some customers may want to use a different payment method, especially if they can’t find the error. It should only take a click for them to add a new card or switch to an alternative method like Google or Apple Pay. The easier it is to make the change, the more likely a buyer will go through with the transaction.

Reason 2: Insufficient Funds or Credit Limit Reached

Credit card issuers temporarily restrict card use when a customer hits their credit limit or exceeds a daily withdrawal or activity maximum. This can be a sensitive issue because it may coincide with larger financial troubles. Thankfully, these are soft declines, meaning you may be able to get the transaction approved without involving the customer at all.

How to fix it

If you run into this error on a one-time or initial purchase (in other words, a transaction where the customer is present), inform them of the failure and help them find a new way to complete the purchase. Typically, it’s easiest to request a different payment method. Buyers whose spending is currently restricted may appreciate a buy now, pay later (BNPL) option.

A customer who can’t switch payment methods will have to put in some work to complete the purchase. For an “insufficient funds” error, suggest they pay down the card; for a “limit exceeded” error, instruct the customer to contact their bank to ask for an exception. However, know that high-effort solutions like these may cause customers to abandon their carts.

When a subscription payment fails for this reason, look to tools like automatic payment retries or Smart Dunning to increase your chances of a successful transaction. But don’t rely solely on these efforts. Retries will only work if a card’s balance is paid down (or an activity limit is otherwise changed). Be prepared to notify customers if the payment doesn’t go through within a certain period after the initial attempt. They may need to reach out to their bank to fix the issue, and if they can’t, they’ll at least know not to expect their shipment on its usual schedule.

Smart Dunning recovers 20% more revenue compared to traditional recovery methods.
Click here to learn more about Smart Dunning.

Reason 3: Suspected Fraud

A card issuer may reject a transaction if the account has been flagged for suspicious activity. These are always hard declines because credit card issuers have a strong incentive to prevent unauthorized purchases.

How to fix it

Let the buyer know their transaction has been flagged as fraud. Customers who believe their card was wrongly blocked may have failed an identity verification step. They should double-check elements like their ZIP code and CVV. If there aren’t any errors in their billing information, they’ll need to contact their bank directly to determine why the transaction was blocked.

When recurring payments are declined as suspected fraud, it’s likely due to changes in your payment processing. For example, crowdfunding platform Patreon saw an increase in fraud reports after moving to a Dublin-based bank. Merchants who end up in a similar position should ask customers to use a different credit card or retry the transaction manually after contacting their bank to approve it.

Reason 4: Lost or Stolen Card

Card issuers will reject any transaction charged to a card that’s been reported as lost or stolen by its owner. These are hard declines, so you’ll need to get a different payment method from the customer before you reattempt the transaction.

How to fix it

Let the customer know their card has been marked as lost or stolen, and they’ll need to use an alternative payment method. However, you’ll want to monitor any customers who trigger this error on a one-time or initial purchase. Most buyers will remember when they’ve asked their bank to close and reissue a credit card. Kount’s anti-fraud suite or similar tools can look for suspicious activity that denotes a buyer as a scammer.

On the other hand, you can expect to see these errors semi-regularly if you process recurring payments. A customer who reports their card as lost or stolen may not remember every place that card was being used. Set up automated dunning emails to prompt these customers for updated payment information.

Reason 5: Expired Card

Most credit cards are good for three to five years, meaning a percentage of your returning customers or subscribers will need to update their card information at some point. Transactions attempted on expired cards will return hard declines, as the credit card company won’t recognize the expired card as valid.

How to fix it

When you alert a customer that their credit card is expired, you’ll need to provide solutions for two potential error types. A buyer who mis-enters the expiration date will need to double-check the date on their card and fix their input. A buyer who enters an expired card, on the other hand, will need to input the information from their new credit card. Make it easy to change both fields (preferably without sending them to another screen) so they can quickly complete the transaction.

You can help prevent expired card errors on your recurring transactions by investing in an Account Updater to automatically request updated payment information from credit card issuers. If you don’t have one (or it misses a card), set your system to flag cards that will expire within 30–60 days and proactively prompt customers to add their new card to their account. Credit card issuers send new cards out a month or two in advance so these customers can update their information in time to prevent a transaction failure.

Decoding and Resolving Other Card Issuer Rejections

50% of customer churn is caused by failed payments.

The five scenarios above cover the most common card issuer rejections, but there are many more reasons a transaction may be declined. Each failure will come with a two-digit credit card decline code. You can use this code to determine the nature of the error and what to do next.

Any time you must involve the customer, give them as much information as you can to help them understand what’s going on and what their (and your) next steps should be. Payment errors may cause irritation or trigger financial anxiety, so clear communication is a must to help you preserve relationships and retain customers.

Of course, the best way to prevent churn is to cut down on card issuer rejections in the first place. Serious ecommerce merchants should update their site to include:

  • A decline management tech stack that includes an Account Updater, Smart Dunning and anti-fraud tools
  • Compliance with all PCI standards
  • Security best practices like tokenization

Don’t let declined transactions spoil your strong relationships with your subscription customers. Implement the tools and strategies in this post to reduce the churn caused by card issuer rejections.

Demystify transaction failures with our free Credit Card Decline Codes Cheat Sheet. This downloadable list gives 22 reasons a card issuer might decline a transaction and guidance on how to resolve each issue.

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