15 Reasons Credit Cards Get Declined

If your business accepts credit cards, you’re going to process some transactions that get declined. But understanding why credit cards decline will help you handle the situation appropriately. 

Credit card declines can be embarrassing for customers—and more often than not, the decline reason is no fault of their own. 

This guide covers everything you need to know about declined credit card transactions. First, we’ll cover the top scenarios why credit cards get declined. Then we’ll show you how to proceed to ensure you’re able to accept payment from your customers and resolve the situation. 

Top 15 Most Common Credit Card Decline Reasons

Credit card declines vary on a case-to-case basis. But 99% of the time, the reason falls into one of the situations below.

1. Credit Limit Maxed Out

One of the top reasons why credit cards decline is directly tied to the cardholder’s credit limit. 

If the cardholder isn’t actively tracking their purchases, then it’s easy to reach the limit without realizing it. This is especially true in months when the cardholder is doing more spending than others. 

For example, if a cardholder has a $5,000 credit limit and they’ve spent $4,500 in their current cycle, a $600 transaction would get declined. 

2. Large Purchase

Even if the cardholder has a sufficient credit limit to cover a purchase, many banks will automatically decline large purchases that are outside of the consumer’s normal spending habits.

Let’s say someone normally uses their credit card to buy gas, groceries, and meals at restaurants. All of these purchases tend to fall between $50 and $200. 

But then they want to buy something that costs $15,000. The issuing bank may decline the transaction to ensure it’s not fraudulent. 

3. Suspicious or Unusual Purchase

In the same vein as large purchases, any suspicious or unusual purchase can also get declined. 

Even if the purchase is legitimate, card issuers decline these transactions to help protect cardholders from fraudsters. 

For example, purchasing a tanning bed on a personal credit card as opposed to a business credit card could be flagged. Or multiple purchases on the same day for items above $1,000 on electronics could be viewed as suspicious. 

4. Purchase While Traveling

Most major credit cards no longer require travel notifications. But sometimes purchases outside of a cardholder’s local area can still get rejected, especially if it’s on a card that’s not frequently used. 

It’s more common for travel purchases to be rejected on international trips. Or a purchase in two locations on the same day could raise some red flags. 

5. Expired Card

This one is fairly common. 

Some cardholders don’t realize that their credit card has expired and attempt to buy something with it. This won’t always get declined for card-on-file transactions. But they will always get declined for in-person transactions. 

6. Incorrect Payment Information

It’s common for credit cards to decline because of incorrect information. This typically happens with manually keyed transactions—when a wrong digit is mistakenly entered. 

But it can also happen if the wrong CVV code gets entered, the wrong zip code is entered, or the wrong expiration date is provided. 

7. Deactivated Account

Credit cards can be deactivated for a number of reasons, including:

• Fraud
• Theft
• Inactivity
• Payment delinquency

These are just a handful of examples. 

Inactivity is one that seems to surprise cardholders the most. Issuers may automatically deactivate accounts with no activity for three, six, or 12 months. So when a cardholder attempts to use that card on a purchase, it’s no longer valid. 

8. Authorization Holds

Authorization holds can cause credit limit issues—even if the cardholder hasn’t actually purchased something. 

For example, hotels and car rental companies put authorization holds on cards to cover damages and additional charges. 

So a single trip could put two separate authorization holds on a single card—$500 for a hotel and $500 for a car rental. That’s an extra $1,000 that goes against a cardholder’s line of credit, in addition to the cost of the room and car. 

While most holds won’t get processed, they still affect the cardholder’s spending ability. 

9. Card Has Not Been Activated

If a newly issued card has been sent through the mail, the cardholder must activate it before they can buy anything. 

Not everyone realizes this, or they mistakenly think the card has already been activated—ultimately leading to a declined transaction. 

10. Reduced Credit Line

Issuing banks run periodic credit checks on active cardholders. If something drastic has changed in someone’s credit history, the bank may ultimately decide to lower that person’s line of credit. 

So a $10,000 credit line could get reduced to $5,000.

If the cardholder doesn’t realize that their spending limit has been reduced, they may attempt to make purchases based on their old limit. 

11. Equipment Malfunction

A credit card decline isn’t always tied to the cardholder or card issuer. Sometimes there’s just an issue with the credit card machine or POS system that causes the payment to fail. 

12. Damaged Card

If a credit card gets wet, bent, or otherwise damaged, it could cause the transaction to decline. 

This is especially true for in-person payments where a working EMV chip or magnetic stripe is required to process the payment. 

But a physically damaged card could still work for something like ecommerce purchases or recurring payments on file. 

13. Fraudulent Activity

If the card issuer detects fraudulent activity on a card, they’ll put a hold on all future transactions. 

These types of policies are put in place to protect cardholders from fraudsters. 

Typically, a text, email, or call to the cardholder can resolve this situation—assuming there wasn’t any actual fraudulent activity. 

14. Primary Account Holder Made Changes

Sometimes an authorized user’s credit card could get declined if the primary account holder revoked access to the account. 

For example, a parent who names their child as an authorized user on an account could put a hold on that card. This is also common for business accounts, where an owner may cancel an employee card. 

15. Missed Payments

If a cardholder isn’t making payments toward their balance, the credit card issuer may ultimately prevent them from making additional charges.

Even if the account hasn’t been officially closed yet, the issuer can still put a hold on the card. 

How to Handle Declined Credit Card Transactions

One of your customers attempts to make a purchase, and the credit card is declined. Now what?

No need to panic. These are the best ways to proceed to ensure you and the customer both get what you’re looking for. 

Verify It’s a Card Decline and Not an Error Message

The very first thing you need to do is make sure that the card actually declined. Sometimes a payment just doesn’t go through right away.

For example, let’s say a customer is trying to buy something in person using tap-to-pay technology. It’s possible that they pulled their card or chip-enabled device away too quickly—before the card reader was able to process the information. 

It’s also possible that there’s an error message from your payment gateway. 

So check the terminal to see if you’re getting an error or a decline code. If it’s an error, simply try the transaction again. 

Refer to the Decline Code

Most terminals will display a credit card decline code on declined transactions. This will tell you the reason, so you can proceed accordingly.

For example, the decline code may tell you that the card is expired or that there’s insufficient funds. 

In some cases, the issuing bank may prompt the business to pick up the card in instances where it’s been reported lost or stolen. 

Credit card declined codes can be really helpful for remote transactions, as they’ll quickly let you know if the number is correct or not. A human error typo could be the reason for some declines. 

Retry the Transaction

Except in certain instances, like where the decline code tells you to pick up the card due to fraud, you can always attempt to run the transaction again. 

Sometimes this will do the trick. 

You could also try to run the transaction a different way. For example, if there’s a problem with the card’s NFC-enabled capabilities for tap-to-pay, then inserting an EMV chip card or swiping it on a magnetic stripe reader could work.

Just be aware that going this route could potentially increase your processing rate for this particular transaction. For example, a chip-enabled card that’s processed through a swipe can incur EMV fallback fees. 

Request an Alternative Form of Payment

Regardless of the reason why the card was declined, everyone wants the same thing—the customer wants to move on with their goods or services, and the business wants to receive payment.

You can always just ask the customer to pay using another credit card, debit card, or cash.

Final Thoughts on Declined Credit Cards

Credit card declines are inevitable. 

But they don’t need to prevent you from getting paid. 

As a business owner, you can refer to this list of credit card decline reasons to make reasonable decisions on how to proceed when transactions get declined. You can also follow the tips above to ensure you’re getting paid for all goods and services rendered.