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What to Do When a Credit Card is Declined

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJan 20232 min read

When a customer’s credit card is declined, it can lead to lost sales revenue – not to mention an awkward conversation. You can turn the situation around with some basic preparation. In this guide, we’ll cover the ‘credit card declined’ meaning as well as some steps to take to complete the transaction.

What is the meaning of ‘credit card declined’?

EFTPOS machines, online payment gateways, and other POS card readers help your business accept card payments directly from customers. When the customer taps, swipes, or manually enters their card details online, they are sent through the payment gateway for authorisation. In most cases, the details are verified. The transaction is approved.

However, there are some cases when a numerical code pops up instead along with the words ‘credit card declined’. This means that the transaction has not been approved. There are two types of credit card declines.

Hard declines: the issuing bank has not approved the payment due to fraud, maxed-out limits, or errors.
Soft declines: The bank approves the transaction, but something else has gone wrong. For example, the merchant’s POS software is out of date.

Why credit cards are declined

There’s a wealth of reasons why credit cards are declined, which we cover more extensively in our guide to credit card decline codes. Sometimes, there’s simply a poor connection or an issue with your POS card reader. Other times, there’s an issue with the customer’s account. Here are a few of the most common reasons for declined credit cards:

Your EFTPOS machine is offline due to an issue with the wireless connection.
The customer has already reached his credit limit.
The customer has already reached his daily spending limit.
The transaction is flagged for fraudulent activity by the card issuer.
The customer is using a card issued in another country.

Unfortunately for cardholders making purchases abroad, card issuers will treat any unusual activity as suspicious. Fortunately, this is quickly cleared up with a phone call to the card issuer.

What should you do when a credit card is declined?

With so many different causes of declined card transactions, how do you tackle the problem in the most efficient way? When a credit card is declined, it can be embarrassing to the customer so this must be handled with sensitivity.

To get started, you should run the card through again and check your card reader’s connection to make sure it’s not a simple technical issue.
If you or the customer have manually entered card details into an online system, check that the information entered matches what’s on the card file. You should also double check the billing address and postcode to ensure they match the cardholder’s account.
Confirm that the card is still valid by looking at the expiration date. If these actions all fail to yield results, you can then ask the customer if they wish to contact their card issuer or try another form of payment. Major credit cards have a toll-free number on the back of the card for customer service.
If all else fails, you can decide whether to extend credit to your customer to avoid losing their business entirely. This depends on your relationship and risk assessment. If it’s worth the risk, extending credit can make the customer feel valued.

How to prevent declined credit cards

One way to avoid credit card declines is to offer alternative forms of payment to your customers. GoCardless offers a direct debit solution including an intelligent retries feature called Success+. This means that if payment is declined the first time around, the system will automatically try it again at the most optimal time. With Success+, you can recover up to 70% of failed payments to save your business time and stress.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.