What Are Decline Codes?

A decline code is just that: the response you get when your customer’s issuing bank turns down a payment transaction. The most widely used decline code is 05, though sometimes is appears with a letter or more zeros in front of the 5. Code 05 is the generic bank decline code for Do Not Honor this card. This is just one of a list of decline codes, and although each code defines a different reason denying payment, they all end the same way – your customer’s payment won’t go through and the sales transaction ends.

“Why Was My Card Declined?”

That’s the obvious question your customer will ask when you tell him his credit card payment has been denied. Typically, most credit cards are declined for one of these reasons:

  • • Insufficient Funds: This purchase puts the credit card over its limit.
  • • Address Verification or Denied for AVS: The numerical portion of the address that was keyed in for verification does not match the information on file at the issuing bank.
  • • CVV Code Match: The 3-digit code on the back of the credit card (or in the case of an American Express card it will be the 4 digits imprinted on the front of the card) is not available or does not match the information on file at the issuing bank.
  • • Expiration Date Invalid: The card has expired.
  • • Restricted MCC Code: MCC stands for Merchant Category Code. This code is assigned to your merchant account and identifies your type of business. Some credit cards are restricted for use at certain kinds of businesses. A customer’s issuing bank may decline a transaction if the card is being used for a purchase where it is not accepted.
  • • Another User Deactivated The Card: Do you operate a business near a college campus? Maybe Mom or Dad got tired of seeing so many charges for meals or clothes on a credit card they gave their student for emergencies. If the cardholder makes a change to the authorized users, when the card is presented it will be declined.
  • • Terminal Configuration Error: In this day and age, we can never discount technology as the reason for an error code. If you’re getting too many declined transactions, your terminal may be the culprit and not your customer’s credit card.

But there are many other reasons why your customer’s credit card payment may be declined. And while some are basic, other reasons are not so obvious.

Account Frozen, Cannot Transfer Funds
Activity Limit Has Been Exceeded
Card Not Permitted For Foreign Currency Transactions
Pick Up Card/Reported Lost
Pick Up Card/Reported Stolen
PIN Tries Exceeded
Invalid Card Number
Invalid Account Number Length or Format
No Such Issuer

And then there are the decline codes as a result of a discrepancy within the merchant’s account or equipment:

Invalid Merchant Number
Limit Exceeded / Per Transaction Limit / Monthly Limit
Acquirer Not Authorized for Foreign Currency Transactions
Invalid Amount Entered
Stop Payment Order
Cardholder Requested Payment of Specific Recurring Transaction Be Stopped
Authorization Center Not Available
Card Type Not Processed By Authorization Center

Most decline codes come with some explanation. If you’re still confused about why your customer’s payment was declined, check with your credit card processor. Generally, the decline code you receive through your credit card processing company is the actual response from the customer’s issuing bank. However, some gateways and third-party transaction services (for example, shopping carts) have their own set of decline codes. It is important to have a list of these codes handy as a reference for your employees.

Though at the time a decline code may seem like just a lost sale, really they are meant for your protection. Today’s technology allows issuing banks to spot inconsistencies in spending patterns. So, for example, when a credit card registered to a cardholder who lives in Berlin is used several times in one day at restaurants and shops in NYC, the issuing bank is going to become suspicious and decline the card. Although these may all be legitimate charges by a German tourist enjoying the sights and delights of NYC, it could also be a thief using a stolen credit card. Take advantage of this protection from fraudulent spending. Never override a decline code unless authorized by the issuing bank.

How To Handle A Declined Charge

When your customer’s credit card payment comes back with a general declined code, you have several options:

  1. 1. Run the card one more time. A slip of the finger when keying in the transaction or a verification number might have been the problem.
  2. 2. If it’s a card-present transaction, advise your customer that their card has been declined and ask for a different form of payment. If the purchase was made on-line, you will have to contact your customer for this information.
  3. 3. Suggest your customer contact their issuing bank to learn exactly what problem triggered the decline code and how they can resolve the problem. Sometimes that can be done right from the point of purchase, and if the problem can be resolved, the issuing bank may give you a code to override the decline and force the transaction through.

A declined transaction often creates an embarrassing situation for your customer and can be awkward for your salespeople. Train your employs on the proper way to handle the situation. Be discrete, and understanding, and your customer will feel comfortable and encouraged to return to your store or ecommerce site to make future purchases.