“Declined,” “insufficient funds,” and “invalid card number” are some of the phrases subscription businesses fear most.

For most ecommerce businesses the solution for a failed one-time transactions are easy to resolve when the purchasers simply uses another payment method to complete the transaction. However, an alternate payment card is generally not an option for subscription businesses where the card details were captured during sign-up and used for recurring monthly payments. 

But with effective payment recovery techniques, dealing with the complexities of recurring billing may alleviate those fears.

But what happens when that information is outdated or has no funds?

A declined credit card payment shouldn't be the end of the road for your recurring business. Whenever a payment method fails, the transaction can and should be retried. Leveraging a subscription and billing platform can help you recover otherwise-lost money and prevent involuntary churn.

A successful retry depends on many factors, including the decline message. There are over 2,000 credit card decline codes, but these are the most common reasons:

Soft credit card declines

Soft declines, which typically happen with debit card payments, occur when the card issuer approves the payment, but the transaction fails at another step in the process. They’re temporary authorization failures that may be successful after a retry attempt. 

Declined

• Message customers see: Your card was declined. In order to resolve the issue, you will need to contact your bank.

• Message you see: The customer's bank has declined their card. The customer will need to contact their bank to learn the cause.

Insufficient funds

• Message customers see: The transaction was declined due to insufficient funds in your account. Please use a different card or contact your bank.

• Message you see: The card has insufficient funds to cover the cost of the transaction.

Note: Business-to-consumer (B2C) businesses usually receive more generic “declined” and “insufficient funds” responses than business-to-business (B2B) companies because they typically have higher credit limits than consumers.

Temporary hold

• Message customers see: Your card has a temporary hold. Please use a different card or contact your bank.

• Message you see: The issuing bank has a temporary hold on the card. This is known as a 'Do Not Honor' response.

Restricted card

• Message customers see: Your card cannot be accepted. Please contact your issuing bank for details or try another card.

• Message you see: The card number has restrictions that prevent it from being used with your merchant account. It is likely a corporate card. The customer needs to use a different card.

Preventing soft declines

The most effective way to recover soft declines is with transaction retries. Recurly’s Intelligent Retries functionality uses machine learning to schedule retry attempts when they’re most likely to succeed. 

After implementing Recurly, we saw a 45% decrease in credit card declines

– Brian Zarlenga, Output General Manager

Every declined transaction is different, which makes a one-size-fits-all retry schedule less successful. Our dynamic analyzes each invoice that received a declined transaction and uses historical data from similar invoices and declines to determine the best date and time to retry it.

Learn how to boost signups with cardless free trials.

Hard credit card declines

Hard declines occur when the card issuer rejects the payment. These are permanent authorization failures that can’t be retried. 

Invalid card/account number

• Message customers see: Your card/account number is not valid. Please update your card/account number.

• Message you see: The credit card/account number is not valid. The customer needs to try a different number.

Invalid transaction

• Message customers see: Your card is not allowed to complete this transaction. Please contact your bank or try another card.

• Message you see: The card type cannot perform the transaction type. The card is likely restricted. The customer needs to contact their bank for details.

Expired card

• Message customers see: Your credit card is expired, please update your card.

• Message you see: The payment gateway declined the transaction because the expiration date is expired or does not match.

This “expired card” error is tricky. It could mean the card is expired or the expiration date does not match the date on file.

Card not activated

• Message customers see: Your card has not been activated. Please call your bank to activate your card and try again.

• Message you see: The card is brand new and has not been activated yet.

Preventing hard declines

For hard declines, we recommend leveraging our Account Updater which automatically updates your customers’ credit cards with current account numbers and expiry dates.

In addition, you can also take advantage of a dunning campaign to collect payments. Dunning is the process of sending email alerts to subscribers when their payment fails, encouraging them to update their payment information and allowing the transaction to go through.

Effective dunning requires planning, testing, and optimization. Learn the 5 dunning dos and don’ts to minimize subscriber churn.

Fraud credit card declines

Credit card fraud declines, also known as false declines, occur when transactions get blocked due to suspicious activity. These are some common fraud alerts.

Fraud stolen card

• Message customers see: The transaction was declined. Please use a different card or contact your bank.

• Message you see: The card has been designated as lost or stolen; contact the issuing bank.

Fraud address

• Message customers see: Your billing address does not match the address on your account. Please fix your address or contact your bank.

• Message you see: The payment gateway declined the transaction because the billing address did not match.

Preventing credit card fraud declines

A robust fraud management strategy is key to avoiding credit card fraud in payments. Fraud management identifies and prevents potential fraudulent activities toward your business or customers. 

Recurly has partnered with Kount, the leading fraud management platform, for superior fraud-fighting capabilities to reduce duplicitous orders and chargebacks, improve subscriber experience, and lower operational costs and churn. 

The causes behind the most common credit card decline codes

Credit card issuers may decline payment for a wide variety of reasons, from credit limits to technological issues to fraudulent activity. Now, A card issuer can't individually call every business owner or salesperson at checkout if someone swipes an expired card.

Instead, you get a credit card decline code.

A decline code summarizes the reason a debit card transaction failed so the business owner can troubleshoot. Like a computing error code, it gives you a place to start to diagnose the problem. (Or even take action to prevent any fraudulent transactions.)

Depending on the decline code, the way you tell your customer about it should be different.

You need to be specific with your customers because there are innumerable reasons any credit card transaction will fail. And what you say can make the difference between a customer swiftly correcting issues with the card issuer—or losing the customer to involuntary churn. As in, the customer doesn't correct the invalid card or insufficient funds because they didn't know they needed to.

Compare these customer-facing messages:

“Your credit card was declined. Check the number and try again.”

“Your credit card is perfectly valid but a restriction is preventing it from being used.”

Yes, the message can affect how your customers feel. More importantly, you can influence what they do. The more clearly you communicate what your customer must specifically do, the better your chances are of getting the transaction through. You may not be able to prevent all declined transactions, but there are proven strategies your business can do right now to reduce declines.

And that's the key to reducing involuntary churn for your business.

Give your team a working knowledge of credit card decline codes and what they usually mean. 

The four most common decline codes decoded

The errors returned by your gateway will vary. (For the curious, Recurly distinctly handles more than 60 error types.) By no means is this the complete list of all the possible codes an online merchant like you may get. 

Instead, here are the most common decline codes you'll get, and a few tips on how your subscription business should communicate about them.

Codes 01 and 02: "Refer to Issuer"

A hard decline, both versions of Refer to Issuer codes mean the bank or card issuer (Visa, Mastercard, American Express, etc.) declined the transaction, and the only thing you can do as a business owner is, well, refer your customer to the card issuer. Code 02 is a special condition, possibly referring to issues with the card type or some other payment detail. In both cases, you can't run the exact same card info again and expect different results. The bank turned it down.

Ask your customer for another payment method or to check their card details for a typo. If they don't have an alternate payment method and you have the right pay information, there's nothing else but to point your customer back to their bank. It's equally possible they hit their credit limit, accidentally used an expired card, or have some other issue that only the card issuer can answer. 

You can run it again to see if it's a false decline. However, if the card in question gives this same error again, it's fair to ask for a separate card. Notably, codes 01 and 02 are not signals of potential fraud. 

Codes 04 and 07: "Pick up card" (no fraud)" and Code 07 "Pick up card, special condition (fraud account)"

Another hard decline, these decline codes are asking you to keep the card, safely and politely. In these codes, the process did go through all the necessary gates. However, the bank declined it.

Code 04 indicates a possibly lost card or some other hold situation with the authorized card user.

Code 07 indicates suspicious activity and possibly a fraudulent transaction.

Now, you're taking online payments. You don't get physical cards, so you're not actually going to pick up the card. So what does this mean for a subscription business like yours?

Since it probably popped up during a recurring online transaction, ask your customer for another form of payment. That card may have been flagged for potential fraud since the previous successful transaction. Ask your customer to Polite, professional, and kind customer service that serves you best in this scenario.

If this error code showed up as a one-time transaction with a client, treat it like any fraud alerts your business may get. Don't try the card again, and don't give your goods in lieu of a different payment coming.

Code 05: "Do not honor"

Probably the most Klingon of all hard decline codes, code 05 comes up regularly in all forms of e-commerce. It's frustratingly vague, as error codes go because code 05 is a default code that banks or payment processors use when they themselves don't have a simple reason to decline it.

"Do not honor" may come up because the customer has several denied payments, so the card got locked or has a hold on it. Their bank might be across international boundaries, the purchase might be uncommon for the customer, a type of transaction the bank isn't used to seeing. The time of day might have tripped a suspicious activity or fraud alert.

Do not honor does not always mean it's fraudulent. Instead, it means that your customer has an issue to discuss with their bank. And making an online purchase with you is likely the first time they've heard of it.

Codes 12 and 13: "Invalid transaction" and "Invalid amount"

The "invalid" error codes are more like when you tell a calculator to divide by zero and it gives you an error. For instance, an invalid transaction, code 12, would be to refund a refund or run a card that doesn't exist. And code 13, an invalid amount, would be trying to make a payment of -$2Ø0. "Invalid amount" isn't about the credit card limit.

The good news is, codes 12 and 13 mean you can do something about it. Check the card details.

Codes 12 and 13 may likely mean there's a typo in the payment method somewhere. The billing address is incorrect, the expiration date is wrong, the security code is wrong, or the card number is wrong (but almost right.)

Double-check the ZIP, the customer's billing address, and the card numbers themselves, and run it again.

You can also check your payment types. Are you running the transaction details the right way? Checking that a transaction is running under the right payment batch could save you from having to request another form of payment.

Three simple business tactics to help you reduce credit card declines

What does a subscription business do to reduce credit card decline rates for recurring payments?

1. Pick a smart partner and platform for your recurring payments.

This wasn't an exhaustive list of credit card decline codes by any means. Instead, you're looking for a platform partner experienced at handling credit card error codes in a way that automates, simplifies, and streamlines your business. Recurly regularly reviews all the failed transactions going through our system to proactively reach out to merchants and help them fix any issues.

We've even rolled out new code to notify us proactively about errors related to misconfiguration, which would include the invalid transaction, code 12. It's our mission to handle all these complexities so you can focus on developing your service.

2. Personalize and customize based on the customer's journey. 

Recurly handles declined cards differently depending on when they occur. At sign-up, specific guidance for every unique error code improves the onboarding customer experience and makes it easier for your business to win that first-time customer. Renewal calls for a slightly different personalization. With a smart categorization strategy and appropriate guidance, we can increase customer retention and improve revenue over the lifetime of your customers. 

3. Communicate specifically and professionally. 

This is about keeping the customer relationship at the forefront when you ask for alternative payment methods. A false positive happens more often than you think. And of all the credit card errors that happen on a given day, the majority are unrelated to credit card fraud. Assume positive intent, and you're probably right. The same professional tone governing your dunning efforts should also show up when you get a credit card decline code. Go into the conversation with the assumption that a minor technical issue unrelated to your customer has blocked your transaction. Odds are, you're right. 

More importantly, you'll create a memorable customer service moment that keeps a subscriber onboard for a lifetime. 

Declined credit card messages FAQs

What do “flagged” and “declined” mean in the world of credit?

Credit cards are often flagged when their use suggests the charges might be fraudulent. Declined credit card transactions mean something went wrong while processing a purchase and couldn’t be completed.

What does “declined” mean when using a credit card?

Cards may be declined for several reasons:

• The card has expired

• The user is over their credit limit

• The card issuer sees suspicious activity that could be a sign of fraud

What is credit card decline code 51?

The 51 decline code error means insufficient funds on the user’s credit card. 

What is credit card decline code 12?

The 12 decline code error means that card details were incorrect and the bank has declined the transaction.

What is credit card decline code 6?

The 6 decline code appears when the issuing bank can't specify the error but something went wrong with the transaction.

What is credit card decline code 78?

The 78 decline code error indicates an invalid or unexisting account. 

What is credit card decline code 3?

The 3 decline code error means the entered credit card information is incorrect or the merchant facility is non-functional.

What are false declines?

False declines occur when a transaction gets blocked due to suspicious activity by the payment processor or card issuer.

How can you prevent credit card declines?

For subscription businesses, transactions can and should be retried whenever a payment fails. Relying on a recurring billing platform can help you recover otherwise-lost money and prevent involuntary churn.

How can you reduce false declines?

A robust fraud management strategy is key to avoiding fraud in payments. Fraud management tools identify and prevent potential fraudulent activities toward your business or customers. 

What do fraud filters look for?

Fraud filters help you prevent potentially fraudulent transactions. These systems identify common fraud indicators, then warn you or decline possible suspicious transactions.

How can you reduce credit card decline rates for recurring payments?

There are several ways to prevent and recover credit card declines: offering diverse payment methods, enabling transaction retries, leveraging an account updater, and designing an effective dunning campaign. The right subscription management and recurring billing platform can help you with this. 

What are the risks of re-running declined credit card transactions?

Certain card networks have rules in place for how many times you can reattempt a single charge. Initiating additional retries may be construed by issuers as potential fraud, potentially increasing the risk of legitimate charges being declined.

Make payments a growth strategy

For businesses that rely on recurring revenue, the message is clear: payment types matter. You must create a frictionless checkout experience and ensure every valid transaction is completed.

In every effective strategy, gathering key benchmark data is the first step. Recurly collected and analyzed data from over 2,200 leading subscription brands to inform your growth strategy.

Check out The State of Subscriptions: The growth chapter to learn about the latest growth benchmarks and trends, how they impact the industry, and how Recurly transforms the subscriber experience to optimize growth.