An issuer decline code is provided by an issuing bank to a merchant, indicating the rejection of a credit card transaction. This means that the issuer has halted or blocked the transaction.
The specific code gives a brief reason for why the issuer turned down the purchase. There are many reasons for an issuer to decline a transaction. Common reasons include suspected fraud and insufficient funds in the cardholder’s account. Issuers take these actions to safeguard their customers and to protect themselves from potential fraud and misuse.
Decline codes are valuable for understanding credit card processing. While they do signify that a transaction was denied by the bank, they also pinpoint the specific issue and offer insight into how to address it and potentially recover the sale.
Distinguishing “Soft” & “Hard” Decline Codes
There are two primary categories of issuer decline responses: “soft” declines and “hard” declines. These types occur under different circumstances and necessitate unique reactions.
Soft Declines
Soft declines are typically temporary issues. They can arise from a brief disruption in network connectivity or if the customer’s account doesn’t have sufficient funds. In most cases, you can attempt to process the transaction again after a few minutes to secure authorization.
Hard Declines
Hard declines, on the other hand, are tied to security concerns that cannot be resolved by simply retrying the transaction. When a hard decline occurs, it means the issuer has outright refused to authorize the purchase. This might happen due to incorrect account details or suspicion of fraudulent activity.
Common Reasons Why Declines Happen
Merchants may have the ability to address or bypass issuer declines in certain situations. However, this doesn’t mean it’s always the best course of action.
If the cardholder can correct incorrect details or if there is inaccurate information held by the bank that the cardholder can amend, the issue can be resolved, allowing the decline to be overridden. Nevertheless, some declines are triggered by anti-fraud mechanisms meant to detect suspicious activity. In these scenarios, it’s prudent to exercise caution and deny the transaction.
Common causes of issuer declines include:
Insufficient Funds
When a cardholder doesn’t have enough money in their account to cover the transaction, the merchant won’t be able to do much to alter the situation. This decline code is quite prevalent, responsible for almost half of all issuer declines according to some reports. In summary, it’s a frequent occurrence.
CVV or AVS Error
Another frequent cause of decline is due to information errors, such as mismatches with CVV (Card Verification Value) or AVS (Address Verification Service). These errors often occur when cardholders make mistakes while inputting their payment information during checkout.
Lost or Stolen Card
Around 10% of issuer declines are attributed to lost or stolen cards. Obviously, transactions using these cards will be refused since replacement cards have already been issued to the cardholders. Attempting to push through such a transaction without proper authorization places liability for any fraudulent activity squarely on the merchant.
Unusual Activity
Any purchase that deviates from a cardholder’s typical spending pattern can trigger a decline from the issuer. Every transaction made by the cardholder is tracked and scrutinized, with any atypical activity potentially highlighted for further action. Instances of abnormal transactions might include international purchases, unexpected large spending sprees, inconsistent spending behavior over time, or shopping within dubious areas or regions.
Expired Card
This issue is straightforward to understand. It is a common scenario and is generally caused by the cardholder forgetting to renew their card or not realizing that their card’s expiration date has passed.
Temporary Hold
This scenario can be somewhat complex. It arises when a specific sum of money is temporarily reserved on the cardholder’s account, leading the seller to unknowingly hit the card’s credit limit. Temporary holds are often used by businesses such as hotels, car rental agencies, and entertainment providers.
Fraud
Finally, we address the gravest cause for issuer declines: fraud. When a transaction is suspected of being fraudulent, the issuer will typically block it and may request that the merchant take certain steps to thwart the fraudster. The issuer decline code will provide guidance on the necessary actions to take to resolve the issue.
Being Proactive Is Key
Like we addressed at the beginning, issuer declines serve as a critical safeguard against unauthorized and potentially fraudulent transactions. Understanding the various reasons behind these declines — ranging from authorization failures and unusual activity to expired cards, temporary holds, and fraud — can help merchants and processors avoid risks and improve the customer experience.
Staying informed and proactive in addressing these issues not only ensures smoother transactions but also fosters trust and reliability between the merchant and cardholder. By recognizing these patterns and implementing the necessary precautions, businesses can navigate the complexities of payment declines with greater confidence and efficiency.
