What are Issuer Declines?

A declined transaction is rarely the herald of glad tidings for merchants. Whenever an issuing bank declines a debit or credit transaction, there’s usually a reason, and their outcomes aren’t always pleasant.

Occasionally, an issuer decline results from a mistake on the merchant or cardholder’s part and is easily rectified… but what if it is the other sort? What should merchants know about issuer declines in order to better respond to them?

What is an Issuer Decline?

An issuer decline code is a code supplied to a merchant by an issuing bank signifying rejection of a credit card transaction. It means the issuer has placed a stop or hold on a transaction. The specific decline code is intended to give a brief explanation as to why the issuer rejected the purchase.

Declined credit and debit card transactions can be highly frustrating for merchants. 

The average merchant only recovers one in three declined credit card transactions. Cardholders tend to blame the merchant, even though it’s not their decision to reject the transaction.

Another issue is the threat posed by false declines. False declines by both merchants and issuers round up to about $443 billion in losses every year.

What Causes Issuer Declines?

Transactions that raise one concern or another are considered problematic by the issuer and would therefore be rejected. To explain the decision, the issuer will assign a decline code for each, summarizing the problem and allowing merchants to respond appropriately.

There are two critical types of decline codes:

Soft Declines

Usually temporary, these may result from an interruption in network connectivity or insufficient funds in the customer’s account. The merchant may retry the transaction after a few minutes to get authorization.

Hard Declines

These are caused by security issues that can’t be resolved by retrying the transaction. It means the issuer refuses to authorize the transaction. This could be due to invalid account information or suspected fraud.

7 Common Reasons for Issuer Declines

There are several reasons an issuer may reject a transaction. Explanations for this include:

• Insufficient Funds: The cardholder lacks the funds to pay for the transaction. This is a standard decline code, accounting for nearly half of all issuer declines by some estimates.

• CVV or AVS Error: These are information errors, like CVV (Card Verification Value) or address mismatches. These typically happen when cardholders enter their payment details incorrectly at checkout.

• Lost or Stolen Card: Approximately one in ten issuer declines resulted from a lost or stolen card. If a merchant attempts to force the transaction without authorization, they are liable for any resulting fraud activity.

• Unusual Activity: This includes anything outside of a cardholder’s established purchasing habits. Everything the cardholder buys is recorded and monitored, and any unusual transactions may be noted and acted upon.

• Expired Card: This is a common occurrence. The cardholder attempted to use a card, but simply forgot to replace their card with a new one, or failed to notice that the expiration date had been reached.

• Temporary Hold: This is caused by someone placing a certain amount of money on a temporary hold on the cardholder’s account, causing the seller to reach their credit limit without realizing it.

• Fraud: When an issuer denies a transaction due to suspected fraudulent activity, they will detail this in their decline codes. They may add details as to how to proceed, like confiscating the card.

What are Fraud-Related Issuer Decline Codes?

If the issuer flags a transaction as fraud, they will include a code to explain the decline. In these cases, the decline codes directly reflect suspected fraudulent activity.

CODE 7 – PICK UP THE CARD (SPECIAL CONDITION)

The card issuer has already flagged the account for fraud. The issuer requests that the card be confiscated.

CODE 41 – LOST CARD, PICK UP THE CARD (FRAUD)

The card has been reported lost or stolen, and the issuer has flagged it for fraud. The issuer requests that the card be confiscated.

CODE 43 – STOLEN CARD, PICK UP THE CARD (FRAUD)

The owner has reported the card stolen, and the issuing bank has flagged it for fraud. The issuer requests that the card be confiscated.

CODE 215 – LOST OR STOLEN CARD (FRAUD)

The card has been reported lost or stolen, and the issuer has flagged it for fraud. The card does not need to be confiscated.

CODE 534 – DO NOT HONOR (HIGH FRAUD)

The transaction failed on PayPal or Google Pay attempted authentication.

CODE 596 – SUSPECTED FRAUD

The card has been flagged as suspicious, and transactions will be denied.