What are the most common reasons for card declines?

Various studies put the level of declined card payments anywhere between 5-10%. For recurring payments – think subscriptions, installments, monthly bills – this tends to be higher, and even higher again for cross-border acquiring. 

Declines do serve a purpose – preventing fraud, for example – but they also represent lost revenue, the marketing cost of creating the sales opportunity again, and the admin cost of chasing overdue payments. Not to mention that 35% of cardholders are likely to abandon a merchant when experiencing a decline.

What is a card decline?

A card decline is when a card payment isn’t authorized or accepted. There are many reasons a credit or debit card might be declined – for example, the card has expired, there are insufficient funds, or one of the parties in the payment ecosystem detects fraudulent activity.

The first step to improve your payment success rate is to understand why payments are declined. In this article, we look at some of the main reasons why a card payment may fail, and offer some solutions on what you can do about each.

Soft vs. hard card declines 

Credit and debit card declines fall into two main types: soft and hard declines. 

• Soft decline – this indicates a problem with a transaction that could potentially be fixed. It can happen when the issuer rejects a transaction due to problems such as insufficient funds or suspected fraudulent activity. Other reasons for a soft decline can be loss of connectivity or other technical difficulties. Merchants can retry the payment after meeting the conditions that caused the failure
• ‍Hard decline – this means the transaction request is firmly rejected. These payments should not be retried. Reasons include: the account is frozen, the card has expired, or the payment details are not valid
  

Most common reasons for card declines and how to prevent them

Lack of funds or hold on the card

It seems obvious, but if a customer doesn’t have enough funds in their account, or has already reached their credit limit, the transaction simply can’t be approved. While merchants can’t control customer finances, there are ways to gain more control over how these situations impact success. 

Solution: Notifications, alternative payment options, and scheduled retries

Speed of communication is critical. Triggering a message to your customer in real-time while they’re still in purchasing mode makes them more likely to retry straight away. Another idea is to provide customers the ability to spread out the cost of their payment using buy now, pay later (BNPL) options, such as Klarna. In the UK, over 9.5 million consumers say they'll avoid buying from retailers that don’t provide BNPL as a payment method.

Alternative payment methods (APMs) also enable your customers to pay without using cash, or a card that belongs to a recognized major card scheme like Visa or Mastercard. The most popular include:

• Prepaid cards: Load money onto a card for purchases, then you can only spend what's loaded. It’s not linked to a bank account, and there’s no borrowing involved
• Real-time bank transfers: Pay online directly from a bank account. Popular examples include iDEAL and Giropay
• Direct debit: The customer authorizes your business to pull funds for recurring payments from your bank account. They’ll always be notified beforehand, with popular examples including SEPA Direct Debit, ACH, and BACS
• Electronic wallets (e-wallets): Digital fund storage loaded via various methods used for online, offline, and cross-border payments. The most popular brands include PayPal and Alipay
• Digital wallets: This is when you store payment cards securely, generating unique numbers for transactions. It’s a secure and convenient way to shop online, in-app, or in-store without revealing card details. The most popular digital wallets include Apple Pay and Google Pay 

Checkout.com offers a subscription payment processing service that prioritizes both security and user-friendliness. This can help you handle recurring payments effectively, leading to improved management and customer satisfaction. You can schedule payment retries for a time period when your customer is likely to have sufficient funds to cover the payment (such as shortly after pay day).

Unverified customer

Merchants should view customer authentication as a positive. It prevents fraudsters from using stolen cards and protects businesses from potential chargeback penalties. However, authentication can sometimes create false positives, where a genuine payer is mistakenly declined. 

Since the rollout of Strong Customer Authentication (SCA) in Europe – and with other markets now enforcing 3D Secure, like Japan, for credit card transactions – merchants are under growing pressure to treat more transactions as potential fraud.

Solution: 3DS2

3D Secure 2.0 has transformed the payer authentication process, introducing greater automation and accuracy. The protocol enables the exchange of more than 100 data points between the merchant and the card issue to access the likelihood that the payer is genuine. 

One-time passwords (OTP), biometric authentication such as fingerprints or facial recognition, and QR codes for mobile applications bring a further level of relatively smooth authentication. Adopting 3DS2 shifts the burden of proof to the strong probability of fraud, and so facilitates more genuine payments that may have otherwise been stopped.

Checkout.com is 3DS 2.3.1 certified by EMVCo, the technical body that manages and promotes secure payment networks. The certification has allowed us to further enhance our payments and fraud prevention capabilities, helping our clients reduce cart abandonment and customer friction while improving payment performance.

Learn more about Checkout.com’s authentication solution.

Fraud triggers

It’s not just an unauthenticated customer that can stop a payment in its tracks. Fraud alerts can also be triggered by suspicious activity, such as anomalies in purchasing patterns, bulk buying, or transacting from an unfamiliar device or IP address. Banks carry the risk and so tend to be over-cautious – for every $1 retailers lose to fraud, they forfeit $30 by declining legitimate customers.

Solution: business prioritization

Bank fraud algorithms are complex, but they boil down to probability. The two key factors they look at are the volume of transactions and the percentage of payment success. So the key is to improve payment acceptance over time while increasing transaction volumes. The latter is largely a function of sales and marketing. But your payment strategy should have a say. Counter-intuitively, it may be that your business is better off generating fewer transactions (for a period) and concentrate instead on ensuring more of them go through successfully.

Working with a payment provider that gives you a granular level of payments data can help identify those issuers declining payments most often. Your PSP can then reach out to those issuers, either directly or through the schemes, to uncover the reasons those payments are getting declined and resolve the problem.

Canceled or expired card

Payment declines caused by outdated card details are a significant challenge for businesses with recurring revenue models. Often the customer inputs their card details once and then gives the merchant permission to take future payments using the same card. Success relies on that specific card being in use, or the customer remembering to update their payment details with the merchant.  

Solution: Network tokenization

Previously, merchants had to prompt customers when their cards were nearing expiry or had to be expired to avoid failed payments. With tokenization now widely adopted, card details can be securely updated in the background, reducing interruptions and keeping recurring payments on track.

In tokenization, the customer's card is replaced with a series of randomly-generated numbers – the “token” – supplied by the card issuer. Unlike cards, tokens have no expiry date, and therefore eradicate the risk of involuntary churn. The higher security level with tokens also serves to combat fraud and improves payment success rates.

Cross-border transactions

Businesses with international ambitions will find that the banking ecosystem is not as orderly as they may like. Often ‘middle’ banks need to become involved between the acquiring and issuing banks; currency exchange may add yet another party to the chain, and a dislocated landscape of different systems, regulations and fraud rules needs to be overcome. All of this adds extra steps and pitfalls to the smooth processing of a payment.

Solution: local acquiring 

One of the most effective ways to overcome these barriers is through local acquiring. Instead of relying on a foreign acquirer that issuers may flag as higher-risk, local acquiring allows you to process payments as if your business were based in the customer’s country. Because issuers are more familiar with domestic acquirers, acceptance rates are higher, settlement is faster, and cross-border fees are reduced.

For example, a German customer buying from a Hong Kong-based ecommerce store is far more likely to have their payment approved if it’s routed through a German acquirer. Local acquiring also enables customers to pay in their native currency, removing confusion and potential foreign transaction fees that can negatively impact their experience. 

Beyond these benefits, local acquiring helps businesses improve cash flow through faster settlement timelines, while also ensuring compliance with local regulatory requirements in each market. Traditionally, businesses needed to open local bank accounts and establish legal entities in every region to access these advantages – a costly and time-consuming process. Today, global partners like Checkout.com provide direct access to local acquiring in multiple regions through a single platform. That means you gain the benefits of local acquiring without the operational burden, and can focus on scaling your business with confidence. 

Incorrect payment information

Cardholders can sometimes supply incorrect details - for example, the wrong billing address - that don’t match the information that the bank has on file for that card. This could be a genuine mistake or attempted fraud. Either way, if there is an address mismatch, the bank will communicate this information to you so that you can decide whether to accept or decline the payment. A merchant may still decide to go ahead with the payment, even if there is an inconsistency in the payment information, depending on their risk appetite. It may simply be that there are multiple ways to format the address and the customer is otherwise low risk.

Solution: Address Verification Service (AVS) and Account Name Inquiry (ANI)

AVS is a tool that merchants can use to authenticate online customers during card-not-present transactions. It’s offered by Mastercard, Visa, Discover, and American Express, though it only applies if the cardholder’s address is in the US, Canada, or the UK.

An AVS check simply compares the numeric values of the address supplied by the customer when making a purchase to the address the issuing bank has on file for that cardholder. The bank uses response codes to inform the merchant of the result, which could signify: a full match, a partial match, no match, the card is international, or the information is unavailable. Every card network uses different codes. You can then use this information to make an informed decision on how to route the transaction.

Account Name Inquiry (ANI) is an additional layer of verification that validates the cardholder’s name against the name held by the issuing bank. Unlike AVS, ANI works independently of the financial transaction. When you request an ANI check, the system returns match results for each name element, or an overall result for the full name. 

ANI checks are available for Visa in the US, Canada, and the UK, and for Mastercard globally (subject to issuer acceptance). This makes ANI a valuable component to AVS, helping merchants confirm both address and name details before processing payments.

It’s important to note that not all mismatches signal fraud, and not all matches confirm legitimacy. Neither AVS nor ANI should be used in isolation to verify a customer’s identity. Instead, they are most effective when used as part of a broader fraud prevention strategy.

How Checkout.com helps businesses reduce card payment declines

Tackling payment declines effectively starts with data. With Checkout.com’s payment processing solutions, merchants gain visibility into where and why declines, segmented by geography, sales channel, product line, and other key filters. This helps you pinpoint problem areas and identify the right remedies.

The same data also powers solutions – from driving smarter routing algorithms to supporting identity validation and triggering real-time customer alerts. With these insights, you can turn payment data into an active tool for improving acceptance rates, rather than just a record of failed transactions.

We also understand that payment optimization is complex and often involves trade-offs. Stronger authentication, for example, improves fraud protection but can add friction to the customer experience. Navigating these trade-offs requires the right balance of expertise, technology, and scale.

Checkout.com helps businesses find the right balance. With deep payments data, extensive acquiring connections, and advanced authentication tools, we support merchants in reducing debit and credit card declines, optimizing fraud prevention, and boosting acceptance – delivering smoother, higher-performing payments for their customers.