How to Reduce Customer Credit Card Decline Rates

May 6, 2019 · 6 min read

According to a survey from, 12 percent of all credit and debit card users in the US experience a card decline each year. The cost to the merchant was significant: 2.6 percent of all income orders and 3.1 percent of all orders over $100.

Even worse, a third of customers who were declined blamed the merchant for the decline, regardless of who was actually at fault.

Yet many of those payment declines had no relation to the customer’s honesty, credit, or bank balance. For example:

  • The card provider or the processing service might have experienced downtime or some other internal problem.
  • A customer may have made a purchase that was “out of character,” leading the provider to flag a legitimate purchase as fraudulent.
  • A hotel, car rental agency, or similar company may have issued a hold on a credit or debit card and may have mistakenly continued the hold even after payment.

Any reason for a decline, whether a genuine case of overdraft or a processing glitch, causes embarrassment and frustration for the customer and a lost sale for you. As a business owner, you have a dilemma:

  • You want to protect yourself from fraud and risk…
  • But you never want those prevention tools to be so sensitive that they lead to high decline rates and falsely flagged purchases.

So, what can you do to control customer decline rates, create a smooth payment experience, and maximize your revenue?

Widen your payment options

Customer preference: Debit cards

The Federal Reserve Payments Study of 2016 shows that:

  • Credit cards and non-prepaid debit cards have each increased in use 8 percent per year since 2012.
  • The use of prepaid debit cards and checks has either stayed level or dropped.
  • Automatic Clearinghouse Payments (ACH) have become the payment method of choice for large transactions—even though ACH is used less often by consumers, the accumulated value is much higher. As new rules allow for same-day processing, the use of ACH on mobile devices is expected to soar.

These figures are confirmed by another recent survey, in which consumers indicated a preference for credit cards (40 percent), with debit cards a close second (35 percent), and cash and PayPal trailing at 11 percent each. Debit is preferred for lower cost transactions (such as gasoline or groceries) and credit for higher cost.

Merchant preference: Credit cards

Every card decline represents a transaction that stalled. As a merchant, you might prefer debit card payments, because credit cards are more costly to process. However, the processing cost of a credit card is offset by the higher chance of a successful transaction. In most studies, 9 percent of debit cards were declined at least once, versus 2 to 5 percent of credit cards.

One good sign for debit cards: the chip enabling technology dropped fraud rates 28 percent after the vast majority of providers transitioned to this form of card in 2016.

The solution

The more payment methods you offer—debit card, credit card, check, e-wallet, direct transfer, cash—the more likely the transaction will complete. Happy customers, happy merchant.

Change your online checkout process

The decline rate for e-commerce transaction is higher than for in-person transactions. Unfortunately, sometimes when a customer’s card is rejected by an e-commerce site, the customer simply switches to another merchant’s website and a different subscription.

The solution

You need a consistent and less complicated checkout process, so that all payment options can be handled at the same checkout point. If you want to look for features from a subscription management tool, account updater and smart retry features are what you should be looking for. They can help rescue a card quickly from a potential rejection.

Accept that some fraud isn’t fraud

Banks and brands differ greatly in their decline rates. One study showed that Chase Bank (12 percent) and American Express had the highest decline rate for debit cards, while US Bank (7.5 percent) and MasterCard had the highest decline rates for credit cards.

Banks, brands, and processors are rarely completely open about the causes for a decline. For example, the 05 code is a general “do not honor” response, usually prompted by the bank’s refusal to honor the card. However, the 05 code doesn’t explain why the bank refused.

Other codes pinpoint a problem at the bank or card processor level, or a problem with your own transaction software. However, these codes vary wildly from gateway to gateway. Bottom line: you have little knowledge and even less control over whether a transaction is rejected because of fraud, or for some other reason entirely.

So, what can you do to get as much information (and control) back in your hands about what declines are due to chargebacks or fraud, and what’s due to other reasons?

Payment authorization software

MasterCard and Visa use 3-D Secure software that has three authentication protocols to reduce online and in person fraud. It authenticates:

  • The bank that issued the credit or debit card
  • The bank and merchant that is receiving payment
  • The infrastructure that supports 3-D processing.

You can decide whether to require 3-D authorization. 3-D provides several advantages, including shifting liability for fraud from you to the bank and improving customer confidence.

However, 3-D also has a few drawbacks. For example, it requires yet another verification layer. It may also insist on sending and receiving a confirmation code, when there’s a chance the customer doesn’t have access to the code.

Intelligent transaction routing software

Intelligent transaction routing connects you to a network of banks, quickly routing the transaction to the bank most likely to accept it. This software is able to evaluate the cause for the decline in real time and will quickly and automatically retry a card several times.

If, for example, the rejection was due to a problem with the processing network rather than outright fraud, multiple retries may allow the transaction to go through.

Having the right subscription billing tool can help with this. For example, Rebilly helps automate fraud prevention with risk-scoring, blocklists. You can also hold declined transactions for manual review, which is a good practice regardless of specific subscription tools. If the decline is for a reason you can control (such as “processor declined”), you can then accept the transaction. (Nationally, up to half of all transactions marked fraudulent are actually fine, so holding onto a declined transaction is a valid option.)

Making sure that your subscription software stack is the best it can be is one way to keep decline rates low. But, no matter what tools you’re using, before you cancel a subscription, you should always do the following:

  • Retry the transaction, perhaps at different times of the day or days of the week
  • Ask the customer to shift payment method (and make it easy to do that)
  • Send out an invoice explaining the problem

Want more tips on how you can reduce your decline rates, while increasing your customer value?

Our Retry Strategy guide teaches you exactly how to use data like decline codes and card types to increase successful charges and your customer lifetime value—to the tune of 43% or more. And it only takes about five minutes to read and implement. Get it for free below:

Retry Strategy

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