FAQ Friday: How Can I Reduce My Credit Card Decline Rates? - DirectPayNet

FAQ Friday: How Can I Reduce My Credit Card Decline Rates?


Declined transactions, whether they are credit card related or not, are a part of doing business online. Yes, they are annoying, but there are always people who have insufficient funds, unfortunately. Issuing banks are also always going to decline specific Merchant Category Codes. That’s just the way it is.

However, that doesn’t mean that there aren’t TONS of methods that could see you drive up your conversion rates by 5-10% almost overnight. The best part is that these methods to boost approval rates are often easy to implement or low cost.

I get asked about declines all the time, and I get really excited talking about them (don’t believe me? Watch my podcast episode talking about them!). I get so pumped because taking care of declined transactions is one of the quickest ways to boost the bottom line. Sometimes you can secure 5% increases in revenue, just like that. And yet, very few merchants I work with spend time on these strategies.

So without further ado, let’s brighten up your day by earning you back those lost sales!

Start By Understanding Your Declines

The first step to fixing any problem is understanding it. So you need to make a start by doing a little digging into why you are experiencing so many declined card payments. A good place to start is with your Merchant Category Code (MCC). This alone could be the cause of a significant number of declined transactions.

In short, many issuing banks will not approve card transactions allocated to specific merchant category codes they deem as high risk (e.g., adult entertainment). As a business owner, it’s always a good idea to find out what the MCC allocated to your merchant accounts is. I’ll explain in a little while why this is so important.

Next, you need to understand your decline codes. You may have reasons stated for a decline in your shopping cart, checkout software, or in your CRM system. But the best way to get the data on your declines is by logging into your payment gateway directly and extracting the data.

Once you’ve got the data, you’ll most likely find that the most common reasons given for a decline are:

  • Insufficient funds
  • Issuing bank decline (usually based on MCC, as stated above)
  • Contact customer service (meaning the card is lost or stolen and needs to be cut up)
  • Technical error

You’ll notice that at least half of those are not within your control as a merchant. However, there are still plenty of strategies you can implement to increase approval rates on your e-commerce transactions.

Let’s start with my favorite, cascading routing.

Cascading Your Payments Through Multiple Merchant Accounts

If you have multiple merchant accounts, you have the ability to implement a decline-busting strategy known as “cascading.” In short, if a payment fails the first time you try to process it, you can have your payment processor “cascade” the transaction down to another merchant account you have available to retry the payment.

Let’s say the transaction failed based on the MCC (let’s say it’s a bizop MCC) the first time around. In that case, you could the payment again, but this time try it with your merchant account dedicated to your e-book sales, which has a different MCC, and so secures approval from the issuing bank.

This technique can still work when your MCC is the same with both payment processors. For instance, it could be that there’s a technical issue, and your first payment processor is experiencing a few minutes of downtime. With cascading, you always have that backup option ready to go, and you can dramatically increase your transaction success rates.

The best part is that this whole process happens in real-time, and your customers won’t even notice the few extra seconds it takes to retry the payment with a new MID.

Provide Reason for Decline an Offer Alternative Method of Payment

An excellent method for saving a decline is to offer an alternative method of payment. Having your checkout software provides the reason for a decline is also key in this strategy.

If a customer doesn’t know why the card declined, they may think the issue is with your site and lose confidence. However, if your checkout page tells them that they have insufficient funds on their Visa debit card, they may immediately switch to try the payment again with their American Express card.

Providing a decline reason forces them to take action. They may even call their card issuer or issuing bank to ask why they’ve been declined.

In the case of insufficient funds, or when a customer has reached the credit limit on their Mastercard (for example), giving them an alternative payment option is crucial. ACH is an excellent alternative payment method that could save the sale.

We’ve found that adding ACH to your checkout can boost conversion rates by as much as 5-7%. The additional bonus is that ACH payments come with much cheaper payment processing fees. (Bonus tip: ACH is now possible for many subscription billing merchants too!).

Offer Payments in Local Currencies

If you operate an e-commerce business with a global customer base, then offering payments in local currencies is another great strategy to boost approval rates. Some issuing banks will decline cross-border payments (e.g., from the UK to the USA). In other cases, if you sell to Canadian or Australian customers and don’t specify your dollar sign referees to USD, then you could face a spate of refund requests and chargebacks.

The solution in both cases is to display products and offer payments in local currencies. You can speak to your acquiring banks and payment processors about this directly. Or you could choose to use a third-party plugin such as Planet Payments to handle everything.

As you grow and scale, you’ll also benefit from the ability to settle in different currencies and add even more to your bottom line by trading the currency at the right times and maximizing your FX rates.

Finally, another note on local currencies. You can also use currencies to price test your products and services. Certain products and services are worth more in foreign countries, and you can charge as much as 10-20% more and experience no adverse effect on sales.

Tips for Merchants Utilizing the Subscription Billing Business Model to Reduce Decline Rates

While the tips and strategies above referred primarily to one-off transactions, plenty of you using the subscription billing business model (such as SaaS companies) will suffer from declined transactions. Luckily, I’ve got plenty of hacks for you too!

So let’s get started.

Secure MAU and VAU as Soon as Possible

This is such an easy hack to implement, and it has massive results. If you’re wondering what I’m talking about, I’m referring to the Mastercard Account Updater (MAU) and Visa Account Updater (VUA) service.

One of the biggest reasons for declines in subscription rebilling is due to expired card information. But if you just pick up your phone and speak to your payment processor, you can receive the updated cardholder information, and the new card data can be updated automatically.

This simple move ensures you never lose a sale due to a card expiration date ever again!

Check/Update Your Fraud Prevention Settings

Another issue that’s really prevalent in the subscription world is the fraud detection settings derailing rebills. Basically, while it’s correct to ask for the card number, CVV, and perform an AVS check on the first payment for a service, they are sometimes left on for rebills.

When your business tries to take the rebill payment, your payment gateway declines a legitimate transaction because items like the CVV weren’t entered, creating a false positive case of fraud prevention. This is a setting that is often left on by default for third-party all-inclusive providers such as PayPal and Stripe.

The solution is to go into your settings and ensure that those settings are off for cardholders who have already provided their information, such as CVV and AVS.  There may be other settings while you’re in there that may affect approvals, so do a little digging. If each corrected setting brings you even an extra 0.5% in approval rates, then it’s been worth your while.

Develop a Reattempt Payment Strategy

Creating a reattempted payment strategy is key. You should never give up on a sale just because the first payment attempt didn’t go through. Firstly, make sure to set up reattempts in the first place, so you’re not unnecessarily losing a customer just because they didn’t have the funds at that exact moment or there was a technical error.

In my experience, the best strategy involved waiting a few days to retake payment. If they didn’t have money in their account, they aren’t suddenly going to have it a few hours later. Also, target reattempts near the beginning of the month. People pay their bills at the end of each month and have better credit limits and cash balances at the start of the month.

Keep testing until you find a reattempt payment strategy that works for you. We’ve found the sweet spot is to retry in between three and five times. Any more than that is likely to annoy the customer. Again, a couple of days in between each attempt is something I would recommend.

A final note I would add is that you could try for a reduced amount. You could say that they qualified for a discount after-the-fact. That way, they remain in your funnel or continue to use your service, dramatically increasing their lifetime value to your business.

Struggling with Decline Rates? Speak to DirectPayNet and Boost Your Conversion Rates By as Much as 10%!

This list of hints and tips is by no means exhaustive, but they deliver the biggest bang for the buck. Most of them you should be able to implement yourself, and many of these features (such as cascading routing or alternative payment methods) should be a part of your payment gateway or checkout software.

If not, you can always install third-party decline recovery middleware to benefit from those features.

If this all sounds too technical or time-consuming for you, why not speak to us here at DirectPayNet? We can perform a thorough audit of your payments ecosystem and deliver transformative boosts to your approval rates. This is especially the case for merchants in high-risk industries struggling to secure approvals from many issuing banks.

If you have a question concerning declines, or you could do with a welcome revenue boost, speak to our expert payments team today for the answers you’re searching for!    

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.