What You Need to Know About Soft and Hard Credit Card Declines

Cari Thompson
By Cari Thompson

Estimated read time: 3 minutes, 59 seconds

Credit card declines are a lot like dating rejections. Both can happen for a lot of different reasons—bad timing, compatibility issues, bad communication—even fraud. But the trick to both declines and rejections is knowing when to try again and when to let it go.

For example, in dating, a soft rejection can be something like, “I’m busy Friday.” Which could mean they’re available on Saturday or Sunday. A hard rejection looks like, “I hate your guts.” In which case, you should definitely move on.

Hard and soft credit card declines work the same way. You just need to know which declines require a little more persistence and which declines will lead to you eating an entire tub of ice cream by yourself. And we’ll help you determine which is which. But first, let’s cover the basics.

What is a Credit Card Decline?

A credit card decline is when, for whatever reason, a credit card payment cannot be processed. It can be caused by the payment gateway, the processor, or the issuing bank.

The payment gateway and processor are both third parties that work together to complete a transaction. The payment gateway denies and approves transactions and securely transmits online payment data to the processor. The processor then transfers payment to the merchant’s bank account.

The issuing bank is the customer’s bank account from which the credit card pulls funds.

Now let’s talk about the different types of declines.

Hard Declines

A hard decline is when the issuing bank does not approve the payment. In other words, hard declines are permanent authorization failures and should not be retried. These failures may be caused by:

  • Stolen Card
  • Invalid Card
  • Closed Account

When a hard decline occurs, the problem originates with the issuing bank or the processor.

The problem with hard declines is that retrying the card number doesn’t work, even if the decline happens on a renewal. With hard declines, the only guaranteed way to prevent losing the payment is to have the customer fix the problem. Which most likely means they’ll have to give you a new credit card.

Soft Declines

A soft decline occurs when the issuing bank approves the payment, but the transaction fails at some other point in the process. Some typical reasons for a soft decline are:

  • Insufficient Funds
  • Processor Declined
  • Card Activity Limit Exceeded
  • Expired Card
  • The Purchase is Unusual
  • The Billing Address and the IP Address Do Not Match
  • The Card is Being Used Abroad

The good news about soft declines is that the transaction failure is temporary. So, you can retry the card in one or two days after the decline occurs and hope for valid authorization.

Of all declines, the majority fall into the soft decline category. This is great news because that means you have the opportunity to save these types of failed transactions.

But even though you have a good chance of saving a failed transaction, the process is still kind of a pain. So, here are some things you can do to avoid declines altogether.

How to Avoid Declines

The first step is to understand why transactions fail online. A full-service ecommerce partner will provide all the tools you need to keep your payment success rate high. However, it’s important to keep an eye on your store and track trends related to payment declines. Did you recently run a marketing campaign in a new region? Are you offering all of the popular payment methods for your audience? Is the checkout experience localized with the right language, currency, and taxes? The goal is to prevent the decline before it happens.

Preventing Declines on Subscriptions with Dunning Management

Another great way to decrease declines is by using dunning management tools. If you’ve never heard of dunning management, this is about to change your life. Dunning management tools allow you to automatically review accounts to proactively prevent failed payments because of expired credit cards. These tools apply specifically to subscriptions/recurring billing.

The technology simply monitors customer accounts and looks for credit and debit cards that are expiring soon. It then notifies the customer of the upcoming expiration and encourages them to update their payment information. And without any extra time or effort from you, you can prevent failed transactions because of something as simple as an expired credit card.

Declines are the worst; they’re awkward for the cardholder and inconvenient for merchants. And while it’s important to understand the different types of declines and their causes, it’s even more important to know how to avoid them altogether. So, make sure you have the tools in place to make sure neither you nor your customers get their heartbroken by rejections … er, declines that could be prevented.

Cari Thompson

Cari Thompson is a copywriter, online marketer, and blogger. She studied marketing and advertising and—drum roll, please—music at Brigham Young University. Cari started in traditional advertising as a media buyer then transitioned into the online world through buzz marketing, blogging, and copywriting.
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