As a small business owner, you need to have a strategy for the uncomfortable moments when a customer’s credit card is declined while trying to purchase from you. Here are four best practices for handling the situation.
1. Have a declined transaction plan in place ahead of time
It’s important to have a plan for dealing with a customer’s declined credit card transaction before the awkward moment occurs. The situation will only become more stressful for everyone involved without a process in place. 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.
One of the first things to note in this situation is that not all credit card declines are due to a problem with the cardholder’s credit. Sometimes there is a unilateral decision by the issuing bank based on risk protocols. For transactions where you manually enter card data, they can often be simply errors when typing in an account number.
Along with the common problems of exceeded credit limits, delinquent payments, and expired cards, there are some less obvious reasons a card might be declined. These include a potential card issuer-initiated account freeze due to international purchases or other unusual buying patterns.
2. Note the credit card decline code
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 while the customer is there, you are supposed to call your credit card processor’s authorization line and ask for a “Code 10 authorization”–but only if you can safely do so. 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 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.)
For reference, you can also refer to this list of the most common credit card declined codes that you might encounter.
3. Request a different form of payment
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.
4. Be aware of declined transaction costs
Each declined transaction costs you 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 resubmissions, 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. Make sure that your form is easy to read and easy to use. It should be clear where the customer enters the correct card expiration date, and then the form can auto-select the card type based on the account number they entered.
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To further help business owners, Visa offers a Merchant Resource Library. Check it out for helpful tips on how to manage fraud and reduce declines for online and other card-not-present credit card transactions.