When a transaction is denied, a business can suffer significant losses. According to a recent survey, when a card was rejected, only a quarter of the customers came back and tried again using a different payment method. About 40% directly gave up. However, there are also other negative consequences other than costing businesses money. Having a relatively high decline ratio can lead to fines put by acquiring financial institutions in response to the wants of issuers.
The decline ratio depends on a number of factors such as the business model, the sector or industry it operates, and the composition of the business’s consumer base. Apart from the penalties applied for a transaction denied, payment processors can also impose additional fines if the trade is currently in default with the set ratios for several weeks or months. Until the business accumulates three consecutive months of compliance, it will remain in the default phase. Some of the most common reasons that cause a transaction to be rejected include;
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Lack of enough funds
A study showed that more than 40% of declines happen because the customer has insufficient funds to complete the transaction. For credit card users, it means they have reached their limit, and the bank cannot allow additional transactions.
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Error
This is the second most common reason why a transaction is denied. A study shows that about 20% of declines are caused when the customer fails to enter the correct details.
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Lost or stolen card
Ethoca reported that about 10% of transactions declined happened because the card is reported stolen or lost. This means every transaction done with the card cannot be accepted.
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Unusual activity
This is also a common reason for rejected transactions. Unusual activities include a change in buyer’s buying habit, buying in laced famous for fraudulent practices, or even making several small purchases.
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Unusual location
This is also a fairly common reason that makes most banks question a transaction. A card user can sometimes make purchases in unusual places or even make an international bank transfer to other countries hence raising a fraud alert.
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Change in billing address
Something as simple as changing the details like billing address can make a transaction get declined. This is mainly because the new address is not recognized or does not match the shipping address.
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Temporary retention
Some customers experience temporary retention when they reach an invisible limit. This usually occurs when firms make a pre-authorization of funds t be paid on a purchase but withholding a percentage of the money to confirm that the transaction is not fraudulent and the buyer has enough finances to purchase.
Overview
There are a number of reasons why card users can decline your transaction. In case of fraud or malicious activity, it would be best not to encourage re-entry regardless of whether there’s a possibility of losing income for the trade. In other cases, you can resolve the problems by asking for an alternative payment method.