Top 25 Reasons Credit Card Payments Fail — and What You Can Do About It
There’s a long list of reasons why payments fail. We'll take a look at the top 25 reasons and strategies to recover failed payments in your subscription-based business.
Breaking down declined credit card charges
All declined credit card charges fit into one of two categories:
- Soft declines happen when the issuing bank approves a payment, but a failure take place somewhere else in the transaction process.
- Hard declines are when the issuing bank doesn’t approve the payment.
Reasons for failed payments
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 it?
While this list touches on the top 25 reasons payments fail, the truth is there are more than 100 ways for credit card payments to fail in your subscription-based business.
So, what's a business owner to do? The answer is certainly not to give up, ignore the problem, hope it will go away or let it fall too far down on your to-do list.
Realistically, you'll never be able to completely eliminate declined credit cards. But, if you plan ahead and have the right system in place for when failed payments do occur, you can not only recoup your failed payment, but retain your customers and increase 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.
Types of failed payment recovery
Here are examples of payment recovery tactics that you can use with an expired card.
First, in order to prevent the failed payment, you could send an email that reminds the customer to update their payment information. As most automated emails, these often get lost in the shuffle.
Therefore, one of the most important things to have in place is a way for your members to easily update their payment information through your site. Even if they have to go to a third-party site to do this, having the necessary links available on a member's account page makes this simple and they won't have to contact you.
- Card Updater
But, the need for customers to update their card details themselves may be a thing of the past. That’s because card updater is being used more and more. Card updater puts the power in the hands of your business to update your subscriber’s card details when the card is nearing its expiry date.
Fattmerchant is just one merchant that already offers this service with others sure to follow. Card updater gives customers one less thing to worry about. And anything that makes your customers’ lives easier is a win for your business.
- Dunning Dilemma
However, if a customer doesn’t update their details and the payment fails, as many do, the default go-to tactic has been dunning emails.
Subscription-based business owners are questioning if the automated choice for failed payment recovery is all it’s cracked up to be, and they have good reason to be alarmed.
Despite subscription-based businesses making every effort to tailor their payment recovery software to encourage customers to update their payment details, it remains a fact that dunning solutions only recover around 15% of the total number of billing failures. Whereas with Gravy, you receive industry-leading failed payment recovery and customer retention results.
Some of the reasons for dunning software's low recovery rate include:
- Ignored Automation
- Lack of Empathy
- Inability to Problem Solve
But, it gets worse. Check out this blog about why dunning software leaves too much money on the table when it comes to failed payment recovery — and can even go so far as to hurt your business.
As an infinitely better option to dunning, think about partnering with the "Ritz-Carlton of payment recovery" — as Online Marketing Expert and Gravy client Rick Mulready puts it — to recover failed payments. And that red-carpet failed payment recovery service? Gravy.
We’re payment recovery and customer retention experts who use proven engagement strategies amplified by technology to retain your customers 24/7, with empathy and problem-solving, whose single aim is to recover your payments with a human touch.
While it's important to have a service such as Gravy in place before you need them (and you will need them) as every membership and subscription business eventually has to deal with failed payments, it's also crucial to maximize the so-called 'Forgotten Funnel' at the back end of your business — to keep higher-paying and longer-staying customers.
It's (truly) about time
While subscription-based businesses will always have to deal with failed payments and failed payment recovery, it doesn't heave to be a loathsome task.
Failed payment recovery goes from a have-to task to a get-to opportunity when you have strategies in place and a service such as Gravy's failed payment recovery ready and waiting to partner with you and your business to retain your customers and users quickly and efficiently to preserve brand integrity and increase lifetime value.
But, don't 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 lifetime of payments tomorrow, both of which Gravy's team are specialists in recovering and retaining.
Be proactive and book a chat with Gravy 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.