The purpose of the current article is to familiarize merchants with the concept of declined credit card transaction recycling, define the fundamental terms associated with it, and show the most common strategies that companies use to maximize their decline recovery rate.
Credit Card Transaction Decline Types
During the normal course of transaction processing (especially, in the context of recurring billing) transactions get declined from time to time. It is sharply felt in the process of batch transaction processing, when the customer is not immediately present to request alternative source of payment. Various tools can be used by merchants to maximize their approval rate or to recover declined credit card transactions.
Credit card transaction declines can be classified as soft or hard.
In case of hard declines there is, usually, almost no chance of recovering the funds (common decline reasons include “account closed” or “card stolen”). These accounts will never be active again and with such an account there is no point in running these declines through declined credit card transaction recycling process.
The most common reason behind a soft decline is “insufficient funds”. In case of soft declines there is a decent chance of collecting money from the customer.
Declined Credit Card Transaction Recycling: Ways and Methodologies
There are several ways for reattempting of declined credit card transactions. The simplest way is reattempting all of the declines again at a later time. Depending on associated processing fees, some people may choose to reprocess both soft and hard declines, although the general practice envisions recycling of potentially recoverable declined credit card transactions.
There are two common methodologies for reattempts.
One methodology envisions trying to reprocess the declined transaction several (usually, up to three) times for several consecutive days. (For example, if a transaction is declined on Monday, declined credit card transaction recycling will be attempted on Tuesday, Wednesday and Thursday).
Reattempting on specific dates
Another methodology envisions trying to reprocess the declined transaction at specific dates of the month or days of the week, according to some schedule, correlated to the common payroll dates of the merchant’s customers. For example, reattempts can be made on the 1st or 15th or every Friday.
Credit Card Account Updater
A lot of recurring declines happen because expiration dates or account numbers are invalid (for instance, credit card number changes after the card is re-issued).
It should be noted, that, sometimes, while processing transactions with “recurring” indicator set (optional parameter in transaction request; when specified, it tells the processor that the transaction is recurring), the processor tends to be more lenient on transactions of this type, and approve them even if the expiration date is invalid.
It is a good practice, however, to incorporate credit card account updater service in declined credit card transaction recycling process. The service is offered by Visa and MasterCard and available through most of the processors and payment gateways. The service allows merchants (submitters) to get updated information, which, usually, includes: updated expiration date, updated cardholder name and even updated credit card number.
There are also some procedural enhancements that can be added to the process of declined credit card transaction recycling.
One of the techniques (also allowing submitters to save some money on processing fees) is as follows. Instead of reattempting all of the transactions at once, it might be advantageous to select only unique account numbers. The reason is that in recurring billing one might often encounter multiple charges on the same card number in the file, and all these charges might be declined. In such cases it is smarter to choose only one transaction per account and use the one that uses the smallest amount, process it first, and only if approval comes in, try the rest of the transactions on this number. This technique increases the chances of collecting at least some money from the customers and, definitely, reduces the cost of unnecessarily running transactions that will decline for sure.
We hope you find this material informative and your business is able to benefit from it. If you would like to suggest some other techniques that you use, don’t hesitate to contact us through ask question page or leave your comments.