Encountered Declined Credit Card? All the information you require is here

The increased usage of credit cards has lead to the upsurge in the processing of number of e-payments. There is no doubt that credit cards have made it convenient for people to make purchases online and in store while offering valuable rewards and benefits in return.

However the rise has also led to some challenges and risks for businesses and customers too. Even the software as a subscription (SaaS) businesses has not been untouched from its effects. Some of the words subscription businesses dread the most are "declined," "insufficient money," and "invalid card number." And one of the major issue of the all is declined credit cards. As per the recent survey, the major contribution in the churn rate of any B2B subscription business is the credit card decline.

Well, before getting to know the ways to respond to the problem while recovering lost revenues, let us first understand what declined credit card means.

Credit Card Decline: What does it mean?

Credit card declines can be one of the most frustrating experiences for both cardholders and merchants alike. A credit card decline means different to both the parties concerned and can be due to multiple of reasons.

A credit card is declined when a payment isn't processed or when the payment processor, such as a bank or credit card company, doesn't authorize the requested transaction. This can happen for a variety of reasons, including insufficient funds, incorrect information, or a lack of authorization from the cardholder.

Credit card declines can have a serious negative impact on businesses, both large and small. This is a major and common issue for the businesses processing recurring payments. It means a missed sale, or lose out on revenue, while to a greater extent this can cause businesses to lose out on potential customers, as customers may not be willing to use cash or other payment methods.

Businesses may also suffer from increased levels of customer dissatisfaction when credit cards are declined. Not only does this lead to a decrease in sales, but it also creates an unpleasant experience for customers and can damage the reputation of the business. This can lead to lost customers and further loss of revenue.

Effect Of Declined Credit Cards on Subscription Businesses

Despite the popularity of Subscription businesses to secure recurring revenue, when a customer's credit card is declined, the impact on their subscription business is significant.

When a customer's credit card is declined, their subscription is cancelled immediately. This leads to a decrease in revenue for the business, as the customer will no longer be paying for their subscription. Additionally, the customer may be less likely to re-subscribe in the future, as they may be less likely to trust the business with their payment information. This may lead to them experiencing frustration and disappointment, as they will no longer have access to the products and services they were expecting to receive.

In addition, the business may need to spend more time and resources to re-engage with the customer and attempt to resolve the issue. This can be a time-consuming and costly process, as the business will need to contact the customer directly, investigate the problem, and potentially offer additional incentives or discounts to encourage the customer to re-subscribe.

As such, businesses on their behalf should take the necessary steps to prevent credit card declines and ensure that customers are able to successfully pay for their subscription.

Why Declined Credit Card?

There are two common reasons for Credit Card Declines -

Soft decline -

There is one thing to keep in mind that for a single transaction to take place, multiple parties are involved. Soft decline of credit cards is a type of declined transaction that is approved by the bank, but either one of the involved parties at the time of transaction is down, unavailable, or interrupted.

As in this types of transaction is approved by the card issuer. It can also be addressed as a temporary decline of transaction, as with a retry attempt, it may lead to successful purchase.

These declines occur when the card issuer does not approve the transaction for a variety of reasons, such as card being on temporary hold, restricted card, due to insufficient funds or an invalid card number. Soft declines are generally considered less serious than hard declines, as they do not indicate a problem with the cardholder’s identity or account.

Hard Declines -

A hard decline of credit card is when a customer’s credit card is declined by the issuing bank due to invalid transaction, incorrect account information, card not activated, or the card being blocked or expired. This type of decline is also known as a negative response.

Hard declines occur when the customer’s credit card issuer is unable to authorize the transaction due to incorrect or insufficient information. This can happen when the customer enters their card information incorrectly, or if the customer’s card has been blocked or expired. In some cases, the customer’s card issuer may also decline the transaction if there is suspicious activity associated with the card or if the customer has exceeded their credit limit.

During hard declined credit card, the issuing bank will send a decline message to the merchant. This message will usually provide the reason for the decline. If the decline is due to incorrect information, the customer should be asked to re-enter their card details. If the decline is due to insufficient funds or an expired card, the customer should contact their card issuer to resolve the issue.

Declined Credit Card Codes And Error Messages

After the payment failure, regardless of the reason caused, two different informations are shared by your processor - Error Code and Error Message.

Let us get a brief overview of both.

Error Code -

Error codes for declined credit cards indicate the reason for the rejection. Each card issuer has a different code range and meaning for the codes, but most are similar. Error codes are a series of numbers and/or letters that represent the type of error that has occurred.

Error messages -

Error messages of declined credit cards are notifications sent to the cardholder and/or merchant when a credit card transaction is declined. These messages typically occur when the cardholder’s credit card issuer or the merchant’s credit card processor has declined to authorize the transaction.

Error messages give the cardholder the opportunity to provide updated information or correct any errors before the transaction is resubmitted. It is important for cardholders to always read and understand the error message in order to determine the next steps needed to complete the transaction.

Both error code and error messages are generated by processor and sent to the customer for evaluation.

How To Reduce Credit Card Declines?

It is crucial for businesses to be aware of the tactics to reduce declined credit cards, as it could be detrimental to the business’s reputation. Customers sometimes do not even bother to know the reason behind the decline and blame the merchant, which brings nothing but the dissatisfaction of them. So reducing credit card declines or preventing it can be a tricky process, but it is possible.

Preventing Soft Credit Card Declines

Soft credit card declines can be a nuisance for customers and merchants alike. Fortunately, there are several steps that merchants can take to help prevent them.

Merchants, on their end, can make sure their payment gateway is up-to-date with the latest security protocols. A routine review of their payment processing practices should be performed to ensure they are using the most secure methods.

A careful review of the information provided by customers when processing credit card payments goes a long way. This includes double-checking names, addresses, and other information to ensure accuracy.

Finally, merchants should communicate with customers if their credit card is declined. This will help the customer understand the cause of the decline and take steps to resolve it. Implementing fraud filters help protect against fraud and other security risks, which can lead to soft credit card declines.

By taking these steps, merchants can help reduce the risk of soft credit card declines and provide a better experience for their customers.

Preventing Hard Credit Card Declines

Ensuring that all account information is up to date is the crucial step in the direction of recovering credit card decline. This means making sure that all billing information is correct, including address, name, and expiration date. It is also important to check the credit card limit and make sure that it is not exceeded.

Making sure that payments are made on time and that credit card balances are kept low. As late payments and high balances lead to hard declines. It is also important to be aware of the card’s terms and conditions, and to use it within those guidelines.

Lastly, dunning campaign is the another significant approach that can have impactful approach to bring back the customers lost to credit card decline to your door again. This way you can encourage your customers to go through the transaction.

Final word

Understanding the repercussions of declined credit cards is significant as it lowers the chances of losing customers if not completely vanish. Declined credit cards can have serious repercussions if not dealt with properly.

Not only can it be embarrassing and create a negative customer experience, but it can also damage a company's reputation resulting in a decrease in revenue. Companies should seek to create an efficient and secure payment process to ensure customer satisfaction and to protect their reputation.