Credit Card Decline Management

Employing a Credit Card Decline Management Process has never been more important.

A 2023 Guide

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Credit Card Decline Management: A Massive Threat to All Recurring Revenue Businesses

Imagine you are a business owner with 500 customers that you bill $100 per month on a recurring basis. Your business runs and plans based on $50,000 per month coming in the door on a regular basis. It took a long time and a lot of work to get to the point where your business generates that amount of reliable predictable income. You pay salaries, rent, plan development, and manage marketing campaigns ALL around that recurring revenue.

Now imagine that 15% of that revenue, or $7,500 per month, goes uncollected — and not because your clients don’t want to pay you.

What’s the problem? Credit card billing declines

credit card decline management

Credit Card Decline Management

Credit card decline rates are increasingly becoming a massive challenge for subscription/recurring billing merchants. Fraud, reissued cards, EMV (chipped) cards and lost or stolen cards all contribute to declines on recurring payments. You have likely been a victim of credit card hacking at Target, Home Depot or potentially many other businesses.

Some statistics:*

  • On average, 15% of recurring credit card payments are declined (with some industries exceeding 30% decline rates)
  • 30% of all credit cards are re-issued each year
  • 1.5 billion EMV chip cards were issued in 2015 and 2016
  • As of fall 2017 only 55% of payments were made via chip cards leaving many more to be issued
  • There is an approximate 5% success rates in obtaining new information from customers on the first attempt after a card is declined

(*Information based on Visa | MasterCard publications and PLC)

Recurring monthly revenue based businesses have been around for many years. Alarm/security companies, cable, phone, and gyms are just some of those that depend on recurring or subscription billing.

The appeal of reliable, predictable income is immense, and many new subscription-based businesses have emerged in recent years. Netflix, Dollar Shave Club, and Birchbox are just a handful of the newer companies leveraging this business model. Fueled by venture capital, these businesses all based on the premise of providing a product or service for which customers will continue pay on a monthly basis. Coupled with new, more sophisticated and targeted advertising mediums, it’s never been easier for these subscription-based businesses to acquire new customers.

Likewise, retaining these customers and ensuring these businesses can count on the revenue they generate has, in turn, led to another new industry — subscription billing management..

Subscription billing management is big business as companies demand the ability to provide multiple payment options to retain clients and maximize profitability. Prorating, metered billing, trial periods, anniversary billing and other options all contribute to the demand for subscription billing management businesses like yours.

As these businesses themselves are subscription based services generating monthly recurring revenue stream there has also been an explosion of billing platform providers. There are many options from which businesses can choose to manage recurring customer payments: Zuora, Vindicia, Avangate, Recurly, Chargify, ChargeBee, FuseBill and more. All those options mean that if one platform falls short, business owners have plenty of alternatives from which to choose.

Most of these platforms will offer some of the strategies we outline below with some using one while others may use a combination. If you are exploring a subscription billing management platform you will want to look into how your provider mitigates the issue of credit card declines.

So what can be done to reduce credit card decline rates?

Fifteen percent of a business’ monthly revenue going uncollected is a big problem. Especially when coupled with the effort required to acquire new information that will allow that business to again bill their client. On top of that, these business owners are losing a percentage of clients every month that they now must replace. Client acquisition costs are a massive expense for any business — losing customers simply because you can’t bill them only adds insult to injury.

If you are a SaaS platform either offering a billing component or subscription management your customers are relying on you to help them mitigate these issues. So how can you help them address this problem and ensure your customers stick with your platform rather than a competitor’s?

If you are a business owner facing these issues what can you do as well? You may be using a software to manage your business or even a Virtual Terminal to collect recurring payments. If that software also includes a billing component you want to be aware of what can be done and what is being done. Credit Card Decline Management can be a part of their service offerings. 


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Why do your cards decline?

It’s very important to start by baselining your decline rates and reasons. Knowing why cards decline plays an important role in planning how you will plan to increase credit card approval rates. The chart below shows common decline codes code responses and reasons. About 50% of these are “soft” declines meaning they might successfully process in the future. 

Declined code Explanation
97 Invalid CVV
78 No Such Account Exists
65 Customer Has Exceeded Activity Limit
63 Card Is Restricted
62 Restricted SIC Code
61 Customer Has Exceeded Withdrawal Limit
57 Service Not Allowed
54 Card Has Expired
51 There Are Insufficient Funds
19 Re-Enter Information
15 No Such Issuer
14 Card Number Is Invalid
13 Card Amount Is Invalid
12 Invalid Transaction
05 Do Not Honor
04 Merchant Should Keep Card

Here are 9 strategies that can be employed to reduce credit card decline rates. Using as many as possible will make your credit card decline management system as efficient as possible.


    • Use the Recurring Indicator when sending transactions. Use of this indicator can improve decline rates and even reduce processing rates in certain locations. If Suzy Jones has been regularly billed $49 from ABC Fitness for many months and her credit card issuing bank sees this via the recurring indicator any issues with a future charge tend to be smoothed out because of the recurring indicator. You should ensure this indicator is included with your recurring transactions. Your payment gateway partner should be able to provide insight.
    • Use Updater programs from MasterCard and Visa, which allow for the automated updating of expired and reissued cards. Updater programs work as follows: Each month your payment gateway provider can send ALL of your cards on file with a question-does this credit card have a new expiration date or possibly a replacement card number? If the answer is yes that new information is now used to process future transactions. Depending on you SaaS provider or billing platform this new information eg new last 4 can be relayed back to the end merchant. This may be important for future customer interaction eg Suzy Jones calls in to make payments and cs rep still has old card info on file even though in the back end payment engine there has been card info changed. This should be discussed with your SaaS provider.
    • Proactive customer outreach reach out to users whose card is approaching expiration rather than waiting until it’s already expired. Many SaaS applications now allow you to run reports regarding clients whose card is about to expire. If the SaaS platform does not your Payment Gateway partner often can do this. Use this data to begin an outreach program to ID and target those customer headed for a credit card decline. An autoresponder can be used to send a series of automated reminder emails to update information. Again depending on your SaaS application this may be a service they provide. Your messaging should be about the benefits they lose if your service is lost. As the expiration date gets closer a more focused outreach including calling should be employed. You can also leverage automated calling platforms eg CallFire that let you automate this as well. Ideally your SaaS partner can allow for self-service card updating information so that your staff is not manually entering [or touching this data]
    • Reactive outreach for clients whose card has expired. Send a series of emails with clear instructions on how to update info AND the benefits they stand to lose by not being able to leverage your product or service. Again a self service updating option where the customer can enter new card data on a secure page is ideal. If you do end up losing that client a series of “We want you back” emails should be launched. Customers are too expensive to acquire to lose because of credit card billing information.Reactive
    • Strategically resubmit declined cards due to soft decline codes such as NSF. A soft decline indicates the card information you have is good. There is a typically temporary reason the card was declined. Common reasons include: NSF – customer has gone over their hard cap credit limit | Late payment – customer’s payment was due on 15th and on 18th still not received | Network communication issue. All of these declines have the potential to approve when tried at a later date. Especially of doing recurring payments the ability to bucket these declines by decline code can enable automated batch retry’s. You might try every 3 days or 6 days. There should not be daily retrying of declined cards as this can cause issues with Visa/MasterCard. Your SaaS and Payment Gateway partners should offer insight into this practice. For expiration date related declines, resubmit the card with strategic expiration date logic. If your payment gateway partner supports send the transaction with a blank expiration date. If unsuccessful you may try variations of 3 years, 4 years and 2 years. Ideally your SaaS application or Payment Gateway partner will offer some type of automated functionality that can manage [and reconcile] these transactions.
    • Consider adding an ACH Payment Integration to add an ACH Processing option  [ checking account debits via Automated Clearing House ] to reduce decline rates. There are two compelling reasons why an ACH option is mandatory for recurring payment based businesses. 1-Much lower processing fees. On an average $100 ticket credit card fees might average $2.40. An ACH transaction in comparison might be 30 cents. If you are doing thousands of transaction per month you can see how attractive the ACH option becomes. 2-Much lower decline rates. As we have discussed credit card decline rates often top 10% and in some cases can exceed 30%. With 30% of cards being reissued every year due to reasons discussed those hugh decline rates make sense. Now think about how often you change bank accounts. For most people that does not happen often if at all. This fact contributes to low ACH reject rates. For recurring payments decline rates of 2% or less can be common. The most likely reject reason is non-sufficient funds. You can find ACH providers that can offer automated retries for NSF transactions.
    • Last chance logic for “given up” transactions: Depending on your payments partner you may be able to use this service to capture potentially lost income [and lost customers]. In essence, the given up on transactions are run through a proprietary platform that bypasses the authorization component of the standard credit card transaction and forces a “hard” sale. So the card issuer is “forced” to accept the charge without their typical capability to issue a soft decline. As you might imagine there are multiple potential issues including higher chargeback rates. This service is typically only available to high-volume merchants doing recurring billing. The benefits include revenue lift [5% is not uncommon] as well as successful future billing for “given up on” transactions. Depending on your payments partner you may be able to use this service to capture potentially lost income [and lost customer]. In essence the given up on transactions are run through a proprietary platform that bypasses the authorization component of the standard credit card transaction and forces a “hard” sale. So the card issuer is “forced” to accept the charge without their typical capability to issue a soft decline. As you might imagine there are multiple potential issues including higher chargeback rates. This service is typically only available to high volume merchants doing recurring billing. The benefits include revenue lift [5% is not uncommon] as well as successful future billing.
    • Partner with a 3rd party that specializes in reducing declines via proactive outreach. When a card declines a combination of email, text and phone calling is initiated by the 3rd party. When your core focus is on recovering credit card declines you tend to get very good at it. A partner may be able to recover 15% of your given up on declines. Fees vary but a % of the recovered declines is not uncommon. For many businesses this makes sense as it is "found money" and you tend to successfully rebill.

Subscription and recurring payment based businesses are facing a challenge that can’t be solved simply by using an updater program. Business owners need and are demanding a comprehensive solution. 

If you are a billing SaaS platform integrating the steps above into your product will give you a competitive advantage by helping you limit or reduce that 15 percent revenue cut. And satisfied customers are more likely to refer other businesses. Educating your current users and prospects will also help you to win more business and achieve better retention rates.

If you are a SaaS application with a billing component the same is true. You can gain new customers by solving these pain points caused by credit card decline rates.

As a business owner you can do your part by being aware of what causes declines and implementing internal procedures to help mitigate the decline damage.

If you would like more information get our 7 Step BluePrint to Maximizing Approval Rates HERE

Contact Us to learn more about Reducing Credit Card Decline Rates and Implementing a Credit Card Decline Management System.