- What is a Card Issuer Rejection?
- What Causes Card Issuer Rejections?
- What are Card Issuer Error Codes?
- How do Card Issuer Rejections Affect My Business?
What is a Card Issuer Rejection?
A card issuer rejection is a type of error code that will appear on the POS or payment gateway when a card transaction is declined by the issuer. It will notify the merchant that the transaction was rejected, and the purchase has not been finalized. This rejection is initiated by the card issuer and can happen for a variety of reasons.
Soft Decline
Soft declines are generally temporary, and the merchant can re-run the card in a few minutes. They tend to result from temporary holds placed on a card or a rejection due to unusual activity in which the card issuer may reach out to the cardholder to confirm their identity before approving the transaction. In these cases, you can generally run the card again in a couple of minutes and it will go through.
Hard Decline
A Hard decline happens for several different reasons as outlined below. This is a card issuer rejection that cannot be re-run in a few minutes. It often requires some investigation on the cardholder’s part to figure out what’s wrong and fix it. As a merchant, there’s not much you can do for the customer in this case.
What Causes Card Issuer Rejections?
Card issuer rejections are initiated by the card issuing bank or financial institution for several reasons. In most cases, those reasons are related to cardholder behavior. Below are some examples.
The card limit has been reached or exceeded. When a cardholder “maxes out” their credit card, the issuer may decline the next purchase they try to make with that card. Most cards have a credit limit to protect the bank from overextending credit to someone who may not be able to pay it back.
The account has insufficient funds (NSF). If the card being used is a debit card, there could be a rejection for NSF. This happens when the bank account connected to the card does not have enough money in it to cover the transaction amount. Some banks offer overdraft protection for their customers, but others do not. If your customer tries to make a purchase that is more than the balance in their account and they don’t have overdraft protection, it will likely be declined.
The CVV or AVS authentication experiences an error. If a cardholder enters their information incorrectly at checkout, it could be declined for this. The CVV is the security code on the back of the card and the AVS is the address associated with the account. Typically, the AVS error would be an incorrect billing zip code entered at checkout. These are generally typos.
The card is expired. If the cardholder tries to use an expired card, it will likely result in a card issuer rejection. Some billing systems will automatically update card information for expired cards, but that’s not always the case. In many instances, cardholders must activate their new card when the previous one expires.
The card has been reported lost or stolen. If a cardholder loses their card, or their wallet is stolen, they may call the bank to deactivate the card. If a criminal has possession of the card and tries to use it, the card issuer will decline the transaction.
The card is being used outside of the normal geographic area for that customer. When a cardholder goes on vacation or travels for work, they may experience card issuer rejection for purchases. This generally happens due to anti-fraud systems that the bank uses to protect itself and its cardholders. Many banks require cardholders to alert them if you will be traveling, so they can approve purchases made while you’re out of town.
The issuer believes fraud is at play. If a card issuer has the proper fraud detection and prevention protocols in place, they may decline a transaction for suspected fraud. This can be related to a number of factors such as unusual purchases, locations, or transaction amounts that are outside of the normal spending patterns for that cardholder. If this occurs, the card issuer will reject the payment.
What are Card Issuer Error Codes?
When a card is rejected by the card issuer, a code is sent to the merchant to explain why the transaction was declined. Here are some of the most common codes and their rejection reasons.
- Code 7: The card issuer has already put a stop to this card for fraudulent activity and requests that the merchant confiscate it at the point of sale.
- Code 41: The card has been reported lost by the cardholder and the issuer requests that the merchant confiscate it.
- Code 43: The card has been reported stolen by the cardholder and the issuer requests that the merchant confiscate it.
- Code 215: The card has been reported lost or stolen, but the issuer has not requested that the merchant confiscate it.
- Code 534: The transaction failed on Google Pay or PayPal and has been flagged for high risk of fraud.
- Code 596: The card has been identified as a high risk of fraud.
How do Card Issuer Rejections Affect My Business?
Card issuer declines result in lost revenue and a lot of frustration for both merchants and cardholders. While some declines are helpful in protecting cardholders from fraud, they make it difficult for the merchant in a variety of ways.
Cardholders who receive a card issuer rejection often blame the merchant rather than their bank or themselves. Most card issuer declines are the fault of the cardholder for the reasons listed above, but many cardholders don’t want to admit that. It’s difficult for a merchant to recover the loss once a card is declined, as it can damage their relationship with the customer.
False declines are also concerning for both parties to the transaction. A false decline happens when a cardholder makes a legitimate purchase with a card that is in good standing and still receives a decline error code. This is a card issuer error, but the customer often blames the merchant. Once a legitimate purchase is declined, it’s difficult for the merchant to recover the trust of that customer and convince them to purchase again.
Conclusion
When you own a business that processes transactions on a regular basis, you will experience card issuer rejections. There is no way to mitigate this, but you can work to recover your relationship with the customer. Communicating effectively with your customers and showing empathy in such situations can help you build a stronger relationship that will help the customer feel better about the incident and continue doing business with you. Focus on responding to card issuer declines in a way that is empathetic, professional, and respectful, regardless of the reason for the decline.
