The card decline error code is typically sent to the point of sale (POS) system within moments of the attempted transaction. If the purchase is being made online, the POS will simply give the cardholder an error message and they will have to choose a different payment method or abandon the shopping cart. If you have a brick-and-mortar business, it can be more complicated because the cardholder is standing in front of you and could become angry or embarrassed.
Why Are Transactions Declined?
There are a variety of reasons for which a transaction might be declined. As a business owner, it’s important to understand the implications of a declined transaction and how to diffuse the situation if the purchase is being made in person. Here are some of the reasons for which a purchase might be declined:
Failed AVS
Address Verification System, also known as AVS, is a security measure used by merchants and payment processors. This system is used to verify that the billing address provided for a credit or debit transaction matches the address on file with the card issuer. It is used by many online merchants and is often used in brick-and-mortar stores, as well.
A failed AVS occurs when the billing address provided by the customer does not match the address on the account. This can happen due to a typo or error when entering the information. It can also be an indication of fraud. When a transaction is declined for a failed AVS, it could be because the customer does not know the address that is associated with the card.
Incorrect CVV/CVC
Card Verification Value (CVV) and Card Verification Code (CVC) are synonymous terms that refer to the security code on the back of a credit or debit card. This code is used to verify that the card being used for a transaction is in the possession of the person making the purchase. The CVV or CVC is a 3 or 4-digit code that is printed or encoded on the card. This code is generally required for all online and telephone purchases.
An incorrect CVV occurs when the customer enters the wrong CVV code for the card they are using. Sometimes, it is the result of a simple mistake on the part of the person entering the information. However, it can also indicate potential fraud. If a customer is trying to make a purchase with a card that is not in their possession, there is a high likelihood that they will enter the wrong CVV and therefore experience a declined transaction.
Insufficient Funds
One of the most common reasons for which a card may be declined is insufficient funds. This is sometimes referred to as NSF or “non-sufficient funds”. In this case, the card issuer has declined the transaction due to a lack of cash in the bank (in the case of a debit card), or lack of available credit in the case of a credit card. If the customer doesn’t have enough cash or credit to cover the purchase, the issuer will decline the transaction.
In this case, the only real option is to use a different payment method. If the customer still wants to complete the purchase, they must provide a payment method that has enough cash or credit to cover the entire transaction.
Card Blocked or Canceled
Sometimes, a card decline error will suggest that the card has been blocked or canceled by the issuer. This can happen when a cardholder loses their card, or their wallet is stolen. In many cases, they will call and report the card as lost or stolen. However, they may have that card saved in various online accounts and try to use it, forgetting that it has been canceled.
In other cases, the person trying to use the card could be a criminal who acquired someone else’s card and is attempting to make a purchase. This is the main reason why a card issuer will decline any transactions attempted with a lost or stolen card.
Duplicate Transaction
A decline for duplicate transactions means the customer was billed twice and the fraud detection system has flagged the purchase and declined the card. This is sometimes a simple error that can be corrected by calling the card issuer to clear the code. Many card issuers also have a system in place that calls the cardholder immediately or sends them an email or SMS message they can approve or deny.
In other instances, it can be an indicator of fraud, which is why the card has been declined. In fraud prevention, there is something called the “velocity of use”, which detects duplicate or multiple transactions on the same card. As a merchant, you can set the parameters around your customers’ typical behavior and help your system to catch these attempts.
Restricted or Banned IP Address
A restricted IP is a message that appears when a user attempts to access a website or online service from an IP address that has been blocked or restricted. This can happen for various reasons, such as security and compliance, or because the IP address has been associated with malicious activity. When a restricted IP code appears, the user will typically be unable to access the site or service and may be advised to contact the site administrator. In some cases, it will tell the user to call their internet provider, as well.
Another reason for a blocked IP error code is that the IP address is listed on a “blacklist” that the administrator has created. This is often the case when an admin is trying to protect their website from malicious actors, spammers, and cybercriminals. This message can also appear as a result of a security feature that blocks certain Ips for too many login attempts.
Suspected Fraud
There are tons of situations that can fall into this category. If an issuer declines a purchase with an error code for “suspected fraud”, it thinks the card is being used maliciously. This could be flagged for any number of reasons, including:
- Purchase is out of the ordinary for the cardholder’s typical purchasing patterns
- Purchase is being made outside of the cardholder’s normal location (i.e. out of town or abroad)
- Multiple purchases have been made on the card in a short amount of time
This is not an exhaustive list, but it gives a good overview of how a processing system might be set up to detect potential fraud. A card issuer may have systems in place to detect these types of situations and block the card to protect it from fraudulent purchases.
Regional or Country Restriction
Many card issuers request that their cardholders alert them if they are going out of town. They ask this because they have systems in place like those described above. Their systems will block the card if someone attempts to use it outside of the normal geographic location where the cardholder lives or works. If you’ve ever been on vacation and your card was declined, despite having plenty of money in the bank, this was the likely cause. Card issuers take precautions like this to protect themselves and their consumers from card theft.
Technical Issue
Last but not least, there could be a technical issue with the card processing system. In this unfortunate case, the cardholder and merchant will be stuck troubleshooting the processing issue. It could be a complete system outage, a lack of internet connectivity, a malfunction on the card terminal, or a host of other issues. Check out our article on card processing outages to learn more about this situation and how to handle it.
Can Pending Transactions Be Declined?
Yes, a pending transaction can be declined. A pending transaction is a temporary hold placed on funds in an account, typically when a card is used to make a purchase or when a check is deposited. The hold ensures that the funds are available for the merchant to process the transaction. This process is called authorization.
Since the transaction has not yet been fully processed, approved, or settled, it may still be declined at some point. The merchant may later submit the transaction for final processing, which can result in the card issuer declining the transaction. It can be declined for all the reasons listed above. It can also be declined because the authorization period has expired. Submitting them for final approval in a timely manner (preferably at the end of every business day), can help reduce expired authorizations.
Final Thoughts
Understanding the reasons for declined cards can help you and your team properly respond to issues that arise when processing transactions. It can also help your business build a great relationship with various card issuers and processors. The more diligent a merchant is in protecting themselves, their customers, and the card issuers from potential fraud, the better. Be sure to educate your team on how to appropriately respond in declined card situations, especially if you have customers in front of you at a brick-and-mortar store.
