Introduction
Declined transactions are an unavoidable part of accepting online payments. Even the best-performing merchants see a meaningful share of card payments fail, often for reasons that feel opaque, inconsistent or out of their control.
But decline codes are more than just error messages. When interpreted correctly, they provide actionable insights into why a payment failed, whether it can be recovered and how your systems should respond. When interpreted poorly, however, they lead to blind retries, frustrated customers and unnecessary revenue loss.
In this guide, we’ll break down how decline reason codes work, how to distinguish hard declines from soft declines and how to use decline data strategically to recover failed card payments and increase conversion.
What are decline codes and why do they matter?
When a card payment fails, the system that rejected it - which could belong to anyone from your payment provider to the cardholder’s issuing bank - returns a response code indicating why the authorization was not approved. These are commonly referred to as decline codes.
Being able to decode these responses is critical to ensure that ‘reversible’ declines are recovered; card scheme fees, issuer friction and fraud exposure are kept to a minimum; and, most importantly, to ensure the best experience for your customers.
Despite their importance, decline codes are often treated as a flat list of errors rather than as signals that inform decision-making.
Hard vs soft declines: the most important distinction
Once we decide to take the step and start understanding why payments are being declined, the most common way of classifying failures is by grouping them as soft declines and hard declines.
Soft declines are payments that could be approved if conditions change. For example, declines due to insufficient funds, format errors or provider unavailability. They are typically recoverable, often through changes in routing or timing, or by providing more information to the issuer to give them greater confidence of the legitimacy of the payment.
Hard declines indicate that a payment is unlikely to succeed with the current payment method. This could be because the payment has been identified as potentially fraudulent, the account has been closed, or the card is no longer valid, having expired, been lost or stolen. Hard declines generally require consumer action, like updating card details, or a change of payment method.
Misclassifying hard declines as soft (or vice versa) is one of the fastest ways to hurt approval rates and customer trust.
Who declines a payment? Understanding payment actors
Knowing at what point along the processing flow a payment failed will also help you identify possible issues. If your customers’ payments are regularly not reaching their issuing banks, you could be losing a significant amount of revenue.
Issuers are (and should be) responsible for the majority of payment declines. They hold the consumer’s account and will decline payments if there are not enough funds available, if the payment looks suspicious and they need to protect their client, or if the card being used is no longer a valid way to access the account.
Intermediary players - such as Gateways, PSPs & Acquirers - are more likely to decline payments due to configuration, formatting or technical issues, but may also employ their own risk management tools. These declines are often fully recoverable, but may need the request to be corrected or processor settings to be updated.
The logic used when deciding whether to approve a payment varies by bank, card type, geography and consumer profile, which means that extracting a precise cause of failure from a network code can sometimes be tricky, especially as some codes are deliberately generic.
Card schemes define the standard response codes used by issuers and enforce certain rules on which codes can and cannot be used in certain scenarios. As a result, it’s a good idea to become familiar with the most common decline codes in the Visa and Mastercard response code lists - but, be aware, the same numeric code can mean subtly different things across schemes, which is why brand-aware decline handling matters.
Decoding the most common decline reasons
Do not honor, and when the decline code doesn’t tell the whole story
’Do not honor’ is the code most commonly used when issuers or acquirers don’t want to give detailed information on why they rejected a payment. It can be due to fraud suspicion or the risk profile of the account used, risk management tools like a blacklist or velocity check, or simply down to issuer preference. Trying to see inside this ‘black box’ decline code is very difficult without issuer input.
In such cases it often doesn’t make sense to retry the same request immediately. Changing the transaction context - retrying on a different MID or via an alternative provider, sending the request at a different time of day, or requiring consumer authentication can all help.
Some decline codes are vague by design. These should be treated as a signal to be cautious, not to retry blindly.
Strategically using decline data to improve approval rates
Understanding decline codes is just the first step. The real value comes from how you incorporate that data into your operation. Leading payment teams translate external codes into categories that reflect intent, such as:
- Temporary vs permanent failure,
- Whether cardholder action is required (eg. authentication),
- Card lifecycle issues,
- Fraud signal strength.
This allows them to build recovery flows, instead of simply retrying the same requests and hoping for the best.
(There’s a famous saying about doing the same thing over and over again and expecting different results…)
Categorizing decline codes based on whether retries are allowed and, if so, when to send them and what actions should be taken in advance will dramatically improve your recovery efficiency. These flows can be honed by using any additional data you have available, such as the Merchant Advice Code, the number of attempts that have already been made, the card brand and issuer, the customer history - the list goes on.
Once you’re up and running, you’ll be able to see not only the impact optimized payment recovery has on your overall conversion, but how thoughtful retry strategies can save costs and help build confidence with issuing banks, without compromising revenue.
Closing remarks
So, yes, it is a lot to take in! Decline codes may indicate why a payment failed but they don’t tell you how that payment can be recovered. The difference between a failed payment being recovered or not often comes down to whether your systems understand not only what those codes mean, but also how to respond.
At Paymend, we’re building a platform to take the complexity away from payment recovery, so that you can leave a failed payment with us knowing that it’s in the best possible hands to get an approval.
With issuing banks becoming increasingly opaque and risk-sensitive, the merchants who win are those who listen carefully to what decline data is really telling them and respond accordingly.
Let’s talk and start recovering your declined transactions together!
