Card Issuer Rejection: Causes, Impacts and How to Fix It

The dreaded “card declined by issuer” message can be frustrating for both customers and e-commerce business owners. For your business, it often results in a loss of customer trust and revenue. 

Card issuer rejections, also known as card issuer declines, are one of the most common payment processing challenges that business owners face. Around 10 to 15% of e-commerce transactions are declined by issuers, and nearly 15% of all card transactions face issuer rejection.

When you think about how many billions of dollars are transacted in the US alone daily, you begin to see how much this costs businesses. Fortunately, most of these rejections can be prevented or quickly resolved if you know what you’re doing.

In this guide, we’ll break down everything you need to know about card issuer rejections. You’ll learn why customers get denied due to card issuer rejection, how they affect your business, and, most importantly, what you can do to minimize them and keep your revenue flowing.

TL;DR

• Card issuer declines happen when a customer’s bank refuses to approve a transaction.
• Common causes include fraud detection, incorrect billing information, expired cards, and insufficient funds.
• These rejections can cost businesses huge amounts in potential revenue, as most customers just abandon the purchase altogether after a payment decline.
• Businesses can prevent card issuer rejection with address verification, fraud screening tools, and clear billing descriptors.
• When rejections occur, offer alternative payment methods and help customers contact their banks.
• Working with experienced payment processors like PayCompass can significantly reduce rejection rates.

Card Issuer Rejection Meaning

A card issuer rejection happens when a customer’s bank refuses to authorize a payment transaction. When a card has been declined, the merchant receives a code and a brief explanation, such as “card declined by issuer.” This can happen with any type of card payment, including credit card or debit card transactions.

Card issuer decline is different from other types of payment failures. The customer’s card might be perfectly valid, and your payment system might be working fine. The rejection happens at the bank level, which means it’s largely out of your direct control as a merchant.

Understanding why these rejections happen and how to respond to them can ensure you don’t miss out on revenue.

Soft Decline vs Hard Decline

There are two main types of card issuer rejections: soft decline and hard decline.

A soft decline happens when a card transaction is temporarily rejected but might be approved if tried again later. The card issuer blocks the transaction due to temporary issues like suspected fraud, insufficient funds, or internal system problems.

A hard decline occurs when a card transaction is permanently rejected and will not be approved even if attempted multiple times. This happens due to issues like an expired card, a closed account, or invalid card details.

The main difference is that soft declines are temporary rejections that may work on another try, while hard declines are permanent rejections that require fixing the underlying problem before the card can be used.

Common Reasons for Card Issuer Rejection

Banks have several reasons for declining transactions, and understanding them can help your business prevent card rejections. Here are some of the common reasons for card issuer rejections:

Incorrect Billing Information

A typo in the account number or an incorrect CVV code can cause a rejection because the card issuer cannot match the input to an account in its system.

Even small mistakes matter. A wrong ZIP code, an old address, or a typo in the cardholder’s name can trigger a rejection for both credit and debit cards.

Insufficient Funds

This is the most straightforward reason customers’ transactions get denied. The customer may simply not have enough money in their account or available credit on their card to cover the purchase. This happens more often with card issuer rejection for debit card transactions since they’re tied directly to checking account balances.

Fraud Detection Systems

Modern banks use advanced tech to detect potentially fraudulent transactions. They analyze spending patterns, location data, and transaction amounts. If something seems unusual, the bank will block the transaction, resulting in a rejection.

Expired or Invalid Cards

Customers don’t always update their payment information when their cards expire and they receive new cards. Sometimes, customers also try to use cards that have been reported lost or stolen, leading to automatic rejection.

Daily Transaction Limits

Some banks set daily spending limits, particularly for debit cards. If your customer has already reached their daily limit, any additional transactions will be denied. This is especially common with card issuer declines for debit card transactions.

International Transaction Restrictions

Some banks automatically block international transactions unless the customer specifically enables them. This can cause a rejection if you’re selling to customers in different countries.

Address Verification Service (AVS) Failures

AVS compares the billing address provided in a transaction with the cardholder’s address on file at their bank. If the addresses don’t match, the bank might issue a rejection.

Card-Not-Present Restrictions

Some cards are set up to only work for in-person transactions. When customers try to use these cards for online or phone purchases, they get denied due to card issuer rejection.

The Real Business Impact of Card Issuer Rejections

Card issuer rejections can negatively impact your business in many ways, including the following:

Direct Revenue Loss

Every rejected transaction is a potential loss of revenue. Studies show that the majority of customers won’t try to complete their purchase again after a card rejection. They’ll either abandon their cart entirely or go to a competitor.

Think about it from the customer’s perspective. They’ve already decided to buy from you, entered all their information, and then faced a rejection. It’s understandably frustrating, and some people may assume there’s something wrong with your website and lose trust.

Abandoned shopping carts often result from payment rejections during checkout.

Cart Abandonment

Cart abandonment is already a major problem for online businesses. Card rejections make it worse. According to data collected by Baymard, up to 8% of cart abandonment is due to card declines. When customers experience payment failures, they’re much more likely to leave without completing their purchase instead of trying again or using a different card. 

Customer Experience Problems

Payment rejections create a poor customer experience. Even if the rejection isn’t your fault, customers often blame the merchant. This can damage your reputation and reduce customer loyalty.

Additional Customer Service Costs

When payments get rejected, customers contact your support team for help. This increases your customer service workload and costs. Your team needs to spend time explaining the rejection, helping customers find solutions, and potentially processing alternative payment methods. 

Potential Compliance Issues

If you handle rejections poorly, you might face compliance problems with payment networks. For example, if you retry rejected transactions excessively, you could be flagged for excessive attempts.

How to Identify Card Issuer Rejections

If you can recognize card issuer rejection issues quickly, you can address them before your bottom line takes the hit. Here are the key signs to look out for:

Decline Code

A card issuer rejection for credit card transactions generates specific decline codes that appear on your POS or payment gateway. These codes indicate the reason for rejection.

Common rejection codes include:

• Code 01: Refer to the card issuer
• Code 02: Refer to the card issuer (special condition)
• Code 05: Do not honor
• Code 06: Error
• Code 12: Invalid transaction
• Code 13: Invalid amount
• Code 14: Invalid card number
• Code 54: Expired card
• Code 55: Incorrect PIN, etc.

Error Messages

Your payment system will display error messages that indicate a rejection. These messages typically include phrases like “denied due to card issuer rejection,” “contact your bank,” or “transaction not authorized.”

Transaction Logs

Your payment processor keeps detailed logs of all transaction attempts. These logs will show you exactly when and why rejections occurred. This can help you identify patterns between card issuer declines.

What to Do When Card Issuer Rejection Occurs

When a card gets rejected, the way you respond can make the difference between losing a sale and keeping a customer. Here’s what to do:

Communicate Clearly with Customers

Avoid showing a generic error message. Instead, explain what happened in simple terms. Rather than saying “Transaction failed,” try something like “Your bank declined this transaction. Please contact your bank or try a different payment method.” 

It’s more specific and actionable, and gives customers an explanation that the problem isn’t on your end.

Suggest Alternative Payment Methods

Always offer backup options. If credit cards are rejected, suggest debit cards. If card payments aren’t working, offer digital wallets, bank transfers, or other payment processors that your business accepts.

Provide Clear Next Steps

Tell customers exactly what they can do to resolve the issue. This might include:

• Contacting their bank to authorize the transaction
• Checking their billing information for accuracy
• Trying a different card
• Using an alternative payment method

Don’t Retry Immediately

Avoid automatically retrying rejected transactions right away. Merchants can fix many of these issues by running the card again, but timing matters. Wait at least 24 hours before retrying, and don’t try more than once without customer permission.

Document Everything

Keep records of rejections, including the decline codes, customer information, and any actions taken. This data will help you identify trends and improve your processes.

Card issuer rejection is a common challenge for businesses today.

How Businesses Can Avoid Card Issuer Rejection Issues

Prevention is the best fix to retain revenue and customer trust. Here’s how to solve card rejection issues before they happen:

Implement Address Verification Service (AVS)

AVS helps ensure that the billing address provided by customers matches what their bank has on file. This reduces fraud-related rejections and improves transaction approval rates.

Use CVV Verification

Always require customers to enter their card’s CVV (security code). This simple step also reduces fraud flags.

Optimize Your Billing Descriptor

The billing descriptor is what appears on a customer’s credit and debit card statements. Make sure it identifies your business, as unclear or confusing descriptors can trigger fraud alerts.

Implement Fraud Screening Tools

Use advanced fraud protection tools that can identify potentially problematic transactions before they reach the issuer.

Keep Customer Information Updated

Regularly prompt customers to update their payment information, especially addresses and expiration dates. Generally, card issuers send replacement cards before they expire. However, customers don’t always update this information with merchants.

Offer Multiple Payment Methods

Don’t rely solely on traditional credit and debit cards. Offer digital wallets like Apple Pay, Google Pay, and PayPal. These services often have higher approval rates because they include tokenization and additional security layers.

Set Up Intelligent Retry Logic

For recurring payments, merchants can avoid this type of card issuer rejection by sending a reminder message to customers the day before their payment is due. In addition, you could use scheduled retries (known as dunning) to attempt payment again in a few days.

Monitor Transaction Patterns

Keep track of your rejection rates by time of day, customer location, and transaction amount. This data can reveal patterns that help you optimize your payment processes.

Comparison Table: Card Decline Triggers and Prevention Tips

Reasons for Rejection	What Businesses Can Do
Insufficient funds	Offer alternative payment methods Retry after 24 hours
Suspected fraud	Use fraud protection tools Optimize billing descriptors
Incorrect billing details	Enable AVS and CVV verification on transactions
Expired or deactivated card	Prompt users to update their card info regularly
International restrictions	Prompt customers to activate global permissions

Final Thoughts

The truth is that businesses cannot totally eliminate card issuer rejection issues as they are mostly out of their control. However, understanding why they happen is useful for implementing strategies that make card issuer rejections less likely for customers shopping with your online store. 

This is why businesses should take a proactive approach. Invest in fraud prevention tools, work with experienced payment processors, and always prioritize clear communication with your customers. 

If you’re struggling with high card issuer rejection rates, you don’t have to try and solve the problem alone. Partner with payment processing experts who understand your industry and can provide solutions that actually work. At PayCompass, we help businesses optimize their payment processes and minimize rejections through advanced technology and industry expertise.

Ready to reduce your card issuer rejections and boost your revenue? Contact our payment processing specialists today to learn how we can help your business accept more payments and create better customer experiences.