Why are credit cards declined?

It is an experience that every merchant and every customer alike dread. It is that the customer’s credit card has been declined. No merchant wants to see this since, unless the customer has another card or cash the transaction has to be cancelled and the merchandise or service will not be sold and the bottom line will not move. There are several reasons why a credit card can be declined and sometimes the customer is right when they say they had no idea.

Now it can be the customer’s fault. At some point they do need to pay their credit card bill and their issuer is going to stop wanting to extend them a line of credit so they can purchase more things. When that day happens their credit card will be declined and the only way around it is for the customer to pay their bill.

A credit card issuer has as much interest in stopping credit card fraud as you, the merchant, and your customers do. They track card usage and when they see something unusual it is flagged. This can happen when a cardholder who rarely uses the card then all of a sudden starts using it a lot or when a customer starts buying things that they normally do not. A credit card issuer can know more about your customer’s spending habits then your customers do. In most cases a hold is placed on the account long enough for the customer to be contacted and it will be released if it can be confirmed that the customer was indeed making the purchase. That means if someone who regularly shops at Wal-Mart all of a sudden buys a $10,000 Gucci handbag could have a few questions to answer from their credit card issuer.

Holds can also be placed on a card if it is observed that the customer is purchasing a large quantity of high-fraud items. These are usually the hot items of the year, think of the hoverboard a few years ago or items like video games or sneakers. A hold can also be placed on the card if transactions begin to appear from other points around the world. Usually this means that the card has been stolen but on occasion the cardholder is really traveling and this can leave them in a very awkward situation. Debit cards can have the same thing happen with them as well. It should also be obvious that a hold will be placed on a card when the cardholder believes it is missing which will freeze all cards associated with that account. It wouldn’t be the first time that someone loses a card, has a hold placed on the account and neglects to tell a spouse. It’s embarrassing, but there is nothing that you, the merchant, can do about it.