The 25 Reasons Credit Card Payments Fail and How to Avoid Them

by | Jul 12, 2021 | Blog

Do you want to know how your company can stop involuntary churn? You’re in luck because we’ve got 25 reasons and strategies for recovering failed payments! Recovering a payment is critical to the success of any membership or a subscription-based business. From generating revenue, building trust with members, retaining customers–it doesn’t get more important than this!

Your customers are people.
 Behind every failed payment is a person.
 You worked hard to earn their trust.
 We will help you keep them.

The decline of your credit card charges can be broken down into two categories: soft declines and hard declines.

Soft declines happen when the issuing bank approves a payment, but a failure takes place somewhere else in the transaction process.

Hard declines are when the issuing bank doesn’t approve the payment.

Here are the 25 Reasons:

1. Payment gateway is misconfigured
The payment gateway may be working correctly, but there’s an error with the configuration, such as an incorrect username or password.

2. Transaction not allowed
‍The customer’s issuing bank has declined to authorize a payment for some reason.

3. Blocked by merchant account
This isn’t common but, in some cases, your merchant account may not be set up to accept the transaction.

4. Primary cardholder deactivated an additional user
If your customer is an authorized user on someone else’s credit card account, the primary cardholder may have deactivated the secondary user’s card.

5. Expired card
The customer’s credit card has expired.

6. Not enough available credit
A customer’s card can be declined when they’re at their credit limit, whether they’ve used all their credit or had the limit reduced unexpectedly.\

7. Do not honor
The issuing bank has issued a fraud alert for the card.

8. Card has been canceled
The customer’s card has been canceled by the issuing bank.

9. Account flagged for fraud
A purchase that doesn’t match a customer’s usual spending habits can be flagged as fraudulent, which causes the card to be declined.

10. Incorrectly entered information
A card number, expiration date, address or security code incorrectly entered will cause a payment attempt to fail.

11. Payment instrument not supported or blocked by payment gateway
The payment gateway doesn’t support the method of payment.

12. Account has been closed
A credit card account can be closed by the issuer without notice for several reasons or a customer may not have yet received notification that their account has been closed.

13. Payment is past due
Credit card issuers may suspend new purchases if the customer’s credit card account is past due.

14. Insufficient funds
The associated bank account does not contain enough funds to complete the payment.

15. Payment collection failed
This generally means that the fraud filter in the payment gateway was triggered.

16. Account is suspended
This is usually an indication that the customer hasn’t been making their minimum payments, causing the account to be suspended until the account is made current.

17. Processor declined
This indicates that a payment authorization was declined by the issuing bank.

18. Card reported lost/stolen
The issuing bank has marked this card lost or stolen.

19. Purchase made while traveling
Customers’ cards may be flagged when they make a purchase in a different country.

20. Invalid address
The billing address entered by the customer doesn’t match the issuing bank’s records.

21. Invalid credit card number
The customer entered a card number that’s invalid.

22. Card terms have changed
This could be as a result of your customer failing to keep up with monthly repayments or they have made some other card violation.

23. Credit card type isn’t accepted
There are some credit card networks that are better known and accepted more than others. MasterCard and Visa are the most common. However, lesser-known card networks could be rejected by your payment gateway.

24. Credit limit has been maxed out
The customer has reached their maximum credit limit and can’t make any more purchases.

25. Transaction blocked
This is a general code for card declines, so it’s difficult to know exactly what the problem is.

Failed Payments: What to do about them?

This list just touched on 25 ways for cards to fail. But, there are more than 100 ways for credit card payments to fail in your subscription-based business. But, what can you do about it? The first thing is not giving up and hoping the problem will go away on its own. You’ll never be able to completely eliminate declined payments but if you plan ahead and have a system in place when they happen, there are some things that might help to recoup them will improving customer retention and increasing their lifetime value.

Failed Payment Recovery: What is it?

Failed payment recovery is a term that refers to a variety of tactics that help recover lost revenue from failed payments, reducing the gap between the money you’re owed and what you’re actually receiving.

Some of these tactics are preventative, working to reduce the number of failed transactions in the first place. Others are active, addressing the failed payments after they happen.

On average, our failed payment recovery rate increased from 33% when we were trying to do it internally to over 80% with the processes set up with Mobile Pocket Offices “Failed Card Process”. That’s a whole lot of saved payments!” Joe, a SAAS, who has 10,000+ SAAS subscriptions  ” 

Types of Failed Payment Recovery

If you offer subscription payments or payment plans, be sure you get paid on time with automatic reminders before and after the card bounces.

Send reminders before the card declines. Automatically remind customers that their card will soon expire so they can update it, you get paid, and their service isn’t interrupted.

Automatically retry to collect payments. If a subscriber misses a payment, automatically attempt to recharge the payment multiple times, and email the customer for a better chance of it going through.

Handle declines your way. When payments don’t get made, you design what happens next. Choose to give clients a grace period, shut off access immediately, or find a middle ground.

If you run a membership site keep your subscription payments coming by proactively and reactively keeping current credit card information on file.

Manage credit card collections and recharges. Customize recharging frequency and duration of retry attempts when a customer’s card fails.

Recover and prevent lost online revenue. Automate your eCommerce processes to recapture and avoid lost revenue.

It’s Time To Look into Failed Payment Recovery

Using proven engagement strategies using technology to assist retaining customers 24/7, with the single aim to recover payments with an automated + human touch only when needed and not the first line of action,  can be a game-changer for your business’s revenue.

While subscription-based businesses will always have to deal with failed payments and failed payment recovery, it doesn’t have to be a loathsome task. Collections is never a fun conversation.

Failed payment recovery goes from a have-to task to an automated task when you have the right technology in place. It’s time to retain more of your customers and users quickly and efficiently to preserve brand integrity and increase lifetime value.

Evaluate your current state of card failures

It’s 5X harder to get a new client than to nurture the ones you already have.

That’s not a secret, and most people know this. But it is a fact that does not get the focus that it deserves. Most service providers, creatives, coaches, and digital marketers have no real plan or strategy to keep their clients.

If you’re having these decline problems now or don’t want to wait until failed payments start to stack up. Time is of the essence when seeking maximum revenue and customer retention.

Because it’s not just about your customer and their payment today; it’s also about your customer’s loyalty and a lifetime of payments tomorrow, both of which the Mobile Pocket Office team can help you eliminate.

Be proactive and book a chat with Mobile Pocket Office today to find out how we can help you to keep more of your subscription payments and customers, so you can continue to do what you love to do.

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