Just about everyone has dealt with the frustration of having a credit card transaction declined. And as a small business owner, you not only need to worry about the embarrassment of having your card declined when you’re out with a customer, you also need to have a strategy for those uncomfortable conversations with customers whose own cards are declined while trying to purchase from you.
Adding to the confusion is that not all credit card declines are due to a problem with the card or with the cardholder’s credit. Sometimes they are unilateral decisions by the issuing bank based on their risk protocols. For online transactions where you enter card data, they can often be simply fat-finger errors when typing in your account number.
A recent Kiplinger post, 7 Reasons Your Credit Card Can Be Declined, lists common causes for rejected transactions and things you can do to head them off. Along with the common problems of exceeded credit limits, delinquent payments, and expired cards, the post highlights some less obvious issues such as card issuer-initiated account freezes due to international purchases and other unusual buying patterns. It suggests contacting your card issuer beforehand if you are planning purchasing activity outside your norm such as traveling overseas, buying a large amount of electronic equipment online, or making a big ATM withdrawal.
As a small business owner, it is important to have a plan for dealing with your customers credit card declines as well. You need to balance good customer relationships with prudently rejecting potentially fraudulent transactions. You should also have a decline strategy in place that cultivates good customers and gracefully turns away troublesome and ultimately unprofitable risks.
Your fraud-radar should go up if you get a decline code that indicates the card has been lost or stolen, or any other response that instructs you to “pick-up” the card from the customer. If you see one of these decline codes and the customer is there with you, if you can safely do so you are supposed to call your credit card processor’s authorization line and ask for a “Code 10 authorization.” You will then receive further instructions over the phone. If you have an online or other MOTO (card not present) transaction, you do not need to take any action for this type of decline. But, you should be very wary of doing business with the customer especially if you do not have a previously existing relationship. (There are perfectly innocent reasons why you might see this type of decline in a card-not present environment such as your customer reporting a card stolen that you have on file for recurring billing transactions.)
Other types of decline may just be problems that a customer needs to work out with their card issuer. In fact, in many cases the customer will be as mystified by the decline as you are. The easiest thing to do in those situations is to simply request a different form of payment. That may be another credit card, an ACH debit from the customer’s bank account, a check, or even cash. You can also give the customer the opportunity to call their card issuer, work out any problems, and get your transaction pre-approved. Then you can run it again, and it should be successful.
Another thing to be aware of is that each declined transaction costs you money the authorization fee for submitting it for approval. While this is typically only a few cents per transaction, if you have lots of declines and re-submissions the costs can add up. This is largely an issue with online payment forms where a customer can submit a transaction multiple times to correct mistakes. While you can’t eliminate data entry errors, you can take steps to help prevent them such as making sure that your form is easy to read and easy to use. For example, make it simple to enter the correct card expiration date, and auto-select the card type based on the account number entered.
To help business owners, Visa offers the Visa E-Commerce Merchant’s Guide to Risk Management. Check it out for helpful tips on how to manage fraud and reduce declines for online and other card-not-present credit card transactions.
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