The Complete Guide to Lowering Credit Card Decline Rates

  • Written By:
    Daniel Ndukwu
  • Published On:
    February 27th, 2020
  • Read Time:
    5 Mins
  • Category:

Most of the time, when a credit card gets declined it’s out of your control. Almost 50% of all declines are due to insufficient funds. That doesn’t mean you shouldn’t do your best to lower credit card decline rates.

If you’re doing a large volume of sales or each sale is worth a lot then lowering the decline rate by a few percentage points can equal thousands of dollars a year.

Instead of focusing on those reasons beyond our control, we’ll look at a few things you can do to lower your credit card decline rate. When done properly, you’ll be able to win back a considerable amount of otherwise lost revenue.

What causes credit cards to be declined & the fix

There are many reasons a legitimate transaction will be declined. Insufficient funds, fraud detection systems in banks, and card operators all play a role. Financial institutions will rather err on the side of caution to protect its customer rather than have to reimburse a fraudulent transaction.

Let’s look at the factors that can contribute to a decline and what you can do about it.

Purchase considered fraud

Visa and MasterCard pegged the average decline rate for card present transactions at just 1.4%. The same card used by the same person has an average decline rate of 15% when used for online shopping. When that transaction is for a recurring subscription, the decline rate jumps up to 23%.

Why does this happen?

The chances of someone stealing credit card information, creating a copy of the card, and walking into a physical store are slim. It’s more likely that they’ll use the card online. Financial institutions are aware of this and their systems treat transactions initiated online differently.

There are millions of false positives in the United States alone and this results in billions of dollars lost by merchants each year.

The solution

Unfortunately, there’s not much you can do about this because online transactions are considered more risky than other types of transactions. With that being said, international transactions are considered even more dangerous.

Consider sending notifications before a rebill to preserve your MRR. If you have a large number of customers in a different country, it may be worth it to establish a merchant account there to process payments. You’ll be able to avoid the added layer of risk associated with international transactions and reduce your decline rate.

Wrong information

Sometimes, people type in the wrong information when trying to enter their card information. When you consider all the fields that need to be filled – 15 or 16 digit card number, expiration date, and CVC – it’s understandable that a mistake will be made occasionally.

If anything goes wrong during this process, the card will be declined. If a customer keeps trying the card, it can even be temporarily suspended.

The solution

Whenever possible (especially on mobile) liaise with the browser they’re using to automatically pull any address or credit card information stored there. At PayKickstart we don’t store credit card information automatically. The risks of failure are just too high.

Instead, we can pull the data from third parties that do store it. For example Square, Google Chrome, and other platforms store this data and can make it available when a customer is filling out a credit card form.

Large pending transaction

Merchants have the ability to put a hold on a card when there’s a transaction that hasn’t been charged yet. For example, you stay at a hotel for 10 nights and the bill is around $1,500. The hotel wants to make sure their charge will go through so it puts a temporary hold on your card before charging it.

The problem with this approach is that the hold can stay on even after the charge that caused it has been successful. Oftentimes, your customer won’t even know what’s happening and won’t know how to rectify the situation.

The solution

There’s not much you can do as a merchant. It’s up to the bank to honor a charge when a hold has been placed on a card. Only the customer can contact their bank and ask for the hold to be removed.

You can help by listing out common problems for your customers. Ask them to double check and make sure they’re not encountering any of them.

Merchant Category Code (MCC)

Your MCC is a 4 digit code that’s used to classify the type of business you run. There are many different types of MCC and you can have more than one depending on your products, marketing channels, and your principle place of business (online or physical).

Certain MCCs have inherently higher decline rates. For example, an online gambling portal will have a much higher decline rate than a gas station or corner store.

The solution

If you notice that you’ve been assigned an MCC that’s not entirely indicative of your business, it may be worthwhile to get it changed. Of course, you shouldn’t use a gas station MCC if you’re an ecommerce brand.

Take MCC 5970 and 5971 as an example. 5970 is for artist supplies and craft stores while 5971 is for art galleries and dealers. If you’re an art gallery mistakenly classed as a craft store, you may notice large transactions are getting flagged. That’s a clear sign your MCC is inhibiting your business and should be changed.

Merchant bank being used

The reputation of your merchant bank has a big impact on your ability to process domestic and international payments. The card issuing services have a long history with almost every established bank and understand which ones pose a higher risk to their networks.

They’ve developed custom rules to deal with each institution. That means you may be the victim of your merchant bank’s (or acquirer if you’re using a service like Stripe) reputation and are losing revenue because of it.

The solution

This is a tricky one because it’s difficult to find out what the standing of your merchant bank is with card issuers. In the language of the digital entrepreneurs, you may just have to test it. Research possible merchant banks and settle on two which appear to have a good reputation. Send an equal number of transactions to each one and look at the data.

Which one has a higher decline rate and what’s the difference? If you see much better results with one then you may have a winner. If not, they may both be good or it may be a sign that you should keep testing.

Conversely, you can use a service that helps you vet and get set up with acquirers with a good standing across the board.


Many of the reasons for credit card decline are out of your control. For the ones you can have an effect on, it’s important to tackle them quickly and effectively.

This article has outlined some of the common reasons for credit card decline and ways you can reverse the trend. Keep testing and tweaking until you have a credit card decline rate you can live with. I would say a rate you’re happy with but we’d all be happy with 0% decline rate which, practically speaking, is impossible.

Let me know how you’re reducing your credit card decline rate in the comments and don’t forget to share.

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Daniel Ndukwu

Daniel Ndukwu is a regular contributor to the PayKickstart blog. He has extensive experience with online businesses, conversion optimization, and subscription revenue models. When he's not writing insightful content, he works with other entrepreneurs to help them grow their bottom line.

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