Ever watch a customer's cart value climb higher and higher, only to see their payment fail at checkout? It's frustrating on both sides of the transaction. Your customer wants to buy. You want to sell. But somewhere between the payment button and your bank account, something goes wrong.
Payment declines cost merchants billions in lost revenue every year. The average online business sees around 15% of legitimate transactions rejected, according to data from payment optimization studies. That's money walking out the door before it even arrives. But here's the thing: most declined payments aren't actually fraud. They're fixable problems that merchants can address once they understand what's happening behind the scenes.
What Actually Happens When a Payment Gets Declined
When a customer submits payment information, their card details travel through multiple checkpoints before approval. Your payment processor sends the transaction to the card network (Visa, Mastercard, etc.), which routes it to the issuing bank. The issuer runs the transaction through fraud filters, checks account balances, verifies card status, and makes a split-second decision.
Here's what they're evaluating:
- Available credit or account balance
- Cardholder spending patterns and transaction history
- Geographic location and merchant category code
- Fraud risk scores based on velocity and behavior
- Your merchant's chargeback ratio and processing history
If anything triggers a red flag, the issuer declines the transaction and sends back a specific decline code. These codes tell you exactly why the payment failed, but they're often buried in technical jargon that doesn't explain what you should actually do about it.
Common Decline Codes by Category
Insufficient Funds Declines
Code 51: Not enough money in the account. This is the most straightforward decline you'll encounter. The customer wants to pay but literally cannot cover the charge.
What's happening: The cardholder has either maxed out their credit limit or doesn't have enough in their checking account. Banks don't provide partial authorizations in most cases, so even being $1 short triggers a full decline.
How to fix it:
- Offer alternative payment methods at checkout (digital wallets, buy now pay later options)
- Set up retry logic that attempts the transaction again 24-72 hours later when funds may be available
- Send cart abandonment emails with payment flexibility options
Fraud Prevention Declines
Code 59: Suspected fraud based on activity patterns. Your customer might be legitimate, but their issuer flagged something unusual about the transaction.
What's happening: Issuers use machine learning to detect abnormal spending. Maybe your customer doesn't usually shop internationally. Maybe they rarely make large purchases. Maybe this is their third transaction in an hour. Any deviation from normal behavior can trigger this code.
How to fix it:
- Implement 3D Secure authentication to add a verification layer
- Collect AVS (Address Verification System) and CVV data to prove legitimacy
- Use fraud scoring tools that provide more transaction context to issuers
- Maintain a low chargeback ratio to improve your merchant reputation
Code 07: Pick up card due to suspected fraud or stolen credentials. This is the issuer's nuclear option.
What's happening: The bank believes the card is compromised and wants it taken out of circulation. This isn't about your business specifically but about protecting the cardholder.
How to fix it:
- Don't retry these transactions automatically
- Reach out to the customer through a separate communication channel to verify
- Flag the account for manual review before attempting future charges
Technical and Card Status Declines
Code 05: Generic "do not honor" message that could mean anything from account restrictions to bank policy violations.
What's happening: The issuer won't specify the exact problem. This catch-all code often appears when a cardholder has placed restrictions on their card, when the merchant category doesn't match expected spending, or when internal bank policies block the transaction.
How to fix it:
- Contact your payment processor to review your merchant category code accuracy
- Check if your business name on statements matches what customers expect
- Ask customers to contact their bank directly to authorize the charge
Code 54: Expired card. The customer is using outdated payment information.
What's happening: Cards typically expire every 3-5 years. Subscription businesses see this constantly with recurring charges.
How to fix it:
- Enable account updater services through your payment processor
- Send proactive emails before cards expire asking customers to update information
- Build retry logic that checks for updated card data before declining
Code 14: Invalid card number. The card number doesn't exist in the issuer's system or was entered incorrectly.
What's happening: This is usually a typo or a fake card number, but it can also happen when customers accidentally provide an old, closed account.
How to fix it:
- Implement real-time card validation at checkout to catch typos immediately
- Use payment forms that auto-format card numbers for easier entry
- Add clear error messages that prompt customers to re-enter information
How Your Chargeback Ratio Affects Payment Approvals
Issuers don't evaluate transactions in isolation. They look at your merchant account's overall health, and your chargeback ratio is a major factor in approval decisions.
The connection works like this: Merchants with high chargeback ratios (above 0.65% for Visa, 1.00% for Mastercard) get flagged as higher risk. When a customer tries to make a purchase from a high-risk merchant, issuers become more conservative with approvals. They're more likely to decline borderline transactions because they assume you're running a problematic business.
Data from payment industry analysis shows that merchants who reduce their chargeback ratio from 1% to 0.5% see approval rates increase by 2-4%. That might sound small, but on $1 million in attempted transactions, that's $20,000 to $40,000 in recovered revenue.
Protecting your approval rates:
- Keep your chargeback ratio below 0.65% consistently
- Respond to chargeback alerts before they become official disputes
- Use clear billing descriptors so customers recognize charges
- Improve customer service response times to resolve issues before chargebacks happen
Building Stronger Issuer Relationships Through Payment Data
You don't have direct relationships with issuing banks, but you can influence how they perceive your transactions. The more validation data you provide with each payment, the more comfortable issuers feel approving it.
Transaction enrichment includes:
- AVS matching to confirm billing address accuracy
- CVV verification to prove card possession
- 3D Secure authentication for additional cardholder verification
- Customer IP address and device fingerprinting
- Purchase history showing repeat customer patterns
Merchants who send enriched transaction data see 8-12% higher approval rates according to payment optimization research. Issuers have more confidence because they can verify multiple data points instead of relying solely on card number and CVV.
Recovery Tactics for Declined Payments
Not every decline is permanent. Legitimate customers often have temporary issues that resolve within days. Building a smart retry strategy recovers revenue without annoying customers or triggering fraud filters.
Effective retry approaches:
- Wait 24-72 hours before the first retry to allow for fund deposits or limit resets
- Use different retry schedules based on decline code (retry insufficient funds declines, but not fraud declines)
- Limit retries to 2-3 attempts maximum to avoid irritating customers
- Send notification emails before each retry attempt explaining what's happening
For subscription businesses: Automatic retry logic is critical. Research from subscription payment studies shows that 20-40% of failed subscription renewals succeed on retry. That's recurring revenue you'd lose without a proper retry system in place.
Alternative payment capture:
- Offer saved payment method options so customers can switch cards instantly
- Provide buy now pay later integrations for customers with temporary cash flow issues
- Accept digital wallets that may have different approval rates than traditional cards
Conclusion
Payment declines will never disappear completely, but understanding what triggers them gives you control over your approval rates. Each decline code tells a specific story about what went wrong. Sometimes it's a customer issue. Sometimes it's a technical problem. Sometimes it's about how issuers perceive your business.
Start by analyzing your decline codes to identify patterns. If you're seeing mostly insufficient funds, focus on payment flexibility and retry timing. If fraud codes dominate, invest in authentication tools. If technical declines are the problem, audit your checkout process for errors. The data tells you exactly where to focus your efforts.
FAQ: Payment Decline Prevention
What's the most common reason for payment declines?
Insufficient funds (code 51) accounts for roughly 40% of all legitimate payment declines, followed by suspected fraud triggers and expired cards.
Can I retry a declined payment?
Yes, but your strategy should vary by decline code, retry insufficient funds and expired cards, but avoid retrying fraud-related declines or stolen card flags.
How does my chargeback ratio affect payment approvals?
Merchants with chargeback ratios above 0.65% see lower approval rates because issuers view them as higher risk and decline more borderline transactions.
What's the difference between a soft decline and hard decline?
Soft declines are temporary issues like insufficient funds that may succeed on retry, while hard declines indicate permanent problems like invalid card numbers or closed accounts.
How can I reduce fraud-related payment declines?
Implement 3D Secure authentication, verify AVS and CVV data, maintain clear billing descriptors, and keep your chargeback ratio below 0.65% to improve issuer trust.
Stop Losing Revenue to Preventable Payment Declines
Chargeblast helps merchants reduce false declines and improve payment approval rates through real-time chargeback prevention. Our platform identifies high-risk transactions before they become disputes, keeping your chargeback ratio low and your issuer relationships strong.
Book a demo below to see how Chargeblast protects your revenue from both chargebacks and the payment declines they cause.
