Declined Transactions by Issuer

Sep 21, 2021

Declined Transactions by Issuer

When credit card issuers decline transactions, the loss to merchants is substantial. In most cases, when a transaction is declined by issuer, the customer abandons the transaction. While in many cases, the issuer decline is due to insufficient funds on the customer’s account, an increasing number of transactions are due to suspicion of fraud.


Why Credit Card Issuers Decline Transactions and How to Handle It

There are several reasons that a credit card may be declined at the point of sale by the issuer. It may be due to insufficient funds or credit availability on the customer’s account, a frozen account, or an invalid credit card number or expiration date. In cases where the customer is making an online purchase, the issuer may also decline due to an invalid billing address or card code verification (CCV). In these cases, the merchant should simply return the card to the customer and ask for an alternative method of payment.

However, it’s important to note that a transaction that’s declined due to an invalid address or CCV may need to be voided by contacting the issuing bank in order for the customer’s funds to be released. 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 a void on the transaction.

In some cases, a credit card may be declined because the cardholder has reported their card lost or stolen. When this occurs on card-present transactions, the merchant should retain and destroy the card.


Declined by Issuer Due to Suspicion of Fraud

A recent study conducted by Ethoca revealed that only 9.4% of declined transactions were due to suspected fraud, while only 10.4% were declined because a card had been reported lost or stolen. Of those declined due to fraud suspicion, only one in 13 transactions were actually fraudulent.

Typically, when a card is declined due to suspected fraud, the merchant will see a message on their terminal simply stating “Declined” or “Do Not Honor”. The response codes in these cases are vague and don’t offer much information to the merchant. In these cases, the merchant’s only option is to decline the card and request an alternative payment method.


Declined Transactions Resulting in Lost Profit

Many merchants express frustration with declined by issuer transactions. The vagueness of response codes leaves many to believe that credit card issuers are frequently over-zealous in their fight against fraud. Unfortunately, in most cases of declined transactions, only 25% of customers offer an alternative method of payment while most choose to abandon the transaction. For merchants who experience a high volume of declined transactions, the loss in sales can be insurmountable.


Saving Transactions After Issuer Declines

Unfortunately, not all transactions can be saved. If a customer doesn’t have an alternative method of payment or available funds to complete the transaction, that usually means the sale is lost. However, in some cases, merchants can take action to save the transaction, thus, saving the sale.


Have Customers Contact Their Card Issuer After a Card-Present Transaction is Declined

If a merchant receives an issuer decline on a card-present transaction, they can provide the customer with the information that they have an have them call their issuer for authorization. In many cases, cards are declined because of something simple like returned mail on the customer’s account or suspicion of fraud due to unusual activity. If the customer contacts their card issuer they can often simply confirm their information and receive authorization for the transaction.


Provide Detailed Information About Declined Transactions to Online Customers

When a customer’s transaction is declined after shopping online, they often receive a non-specific error code stating “Transaction Not Complete” or “Transaction Error: Please Try Again.” By providing solution-based decline messages to customers, they’ll feel more confident completing their transactions with an alternative payment method. A merchant who provides a decline message with helpful details notifying the customer if they’re been declined due to insufficient funds or an address or CVV error provides them with more insight that may enable them to fix the error while letting them know that it’s their card and not simply a glitch in the merchant’s system.


Accept a Wide Variety of Payment Methods

Merchants who provide their customers with more payment options are more likely to receive alternative payment methods after a card is declined. Methods such as PayPal, BitCoin and Check21 can help customers to easily complete the transaction if their original payment method didn’t work. High risk merchants are also eligible to offer alternative payment methods.

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