Reasons Why Your Credit Card Is Declined by a Merchant

7 min read • Published 27 March 2023
Written by Samarth Tandon

Cashless transactions are the latest trend, and credit cards have made it even simpler. You can now shop online or even offline with just the swipe of a card and pay for your expenses later, without affecting your savings. However, cardholders must abide by some basic practices, to properly maintain their credit cards. Failing to do so, may reject or freeze your card usage.

Furthermore, if you are out with your friends and your credit card gets declined, it can be quite embarrassing. If you read through the following article, you can save yourself from such circumstances. 

Why Do Merchants Decline Credit Cards?

Credit cards can be declined due to various factors. It may range from a technical glitch or server issue to poor credit management skills. Issuers usually lend credit to borrowers who have an excellent credit history and behaviour. Therefore, if the lender senses fraudulent transactions or any suspicious activity, they may freeze the credit account until further investigation.

Moreover, if you cannot manage your finances and regularly exceed your credit limit, without clearing your defaults, it may also raise a red flag for the lender, thereby barring you from any further transactions. These are some reasons why a merchant may not accept your credit card.

Follow the sections below to better understand the circumstances under which your credit card can get declined.

When Can Merchants Decline Your Credit Card?

Here are some factors that may deny your credit card for online or offline purchases

  • Technical or Server Issue 

Credit cards have an electronic chip which connects to the card network or the concerned bank and confirms payments. As credit cards are mobile, and one may regularly use it while on a move, that may damage the magnetic chip inside the credit card. In that case, credit card swipes will not work in your favour.

Furthermore, the credit card may get declined due to issues related to the payment gateway server, the processing bank or the bank issuing the transaction. 

  • Expired Credit Card

It is quite common for people to forget that every credit card has an expiry date and it’s understandable considering the fast-paced life. Therefore, if your card gets declined, you should check if it has gone past its validity. If it did, you should get it renewed by contacting the concerned issuing bank to resume operations.

Furthermore, to avoid such situations, it is recommended that you carry some cash with you for emergencies.

  • Suspicious Transaction

Credit cards are sensitive to any changes in spending patterns. Hence, any abnormal or unusual transaction through your card may raise an alarm for a fraudulent transaction, which may temporarily block your credit card.

This can happen if you make international transactions, place a purchase order in foreign currency or make significantly higher transactions via credit cards. You can enable international transactions through net banking and inform the lender about any unnatural transactions beforehand, to avoid such issues.   

  • Wrong Credentials

Online shopping via credit cards requires you to enter your credit card credentials like cardholder name, expiry date, CVV, etc. However, remember that merchants can not access your credit information. Rather, you will be redirected to your card network portal, where you will receive a One Time Password (OTP) through SMS.

Any erroneous input might decline your credit card transaction. Moreover, repeatedly entering an incorrect PIN while shopping offline may also deactivate your credit card temporarily. You can eliminate the need to enter your credit card credentials repeatedly by opting for the tokenization feature.    

  • Inactive Transaction Options

Most of the credit cards available in the market offer flexible transaction options to borrowers. This allows them to activate or deactivate certain transactions for safety purposes. For example, if you do not shop online, you can deactivate your contactless payment option through the or the credit card app in some cases. You can also set a transaction limit on your credit card, beyond which it would stand inactive.

If you are travelling abroad and need to use your card for making purchases, you can activate the card for international transactions. 

  • Card Limit Reached

Every credit card has an assigned borrowing limit. Premium credit cards have higher credit limits than ordinary ones. Therefore, if your credit card payment is declined, then you should check if you have exceeded your borrowing limit.

Some banks may also allow you to avail credit card services even if you exceed your credit limit. However, you must always avoid over-utilisation, as it may severely affect your credit score. In addition, it may impose heavy penalties and interest rates, making it more difficult for you to repay credit card debt.  

  • Account Closed or Frozen Until Further Notice

In some instances, the creditor may close or deactivate your account until further notice. This might be due to various reasons. The most obvious would be a low credit score. A low credit score decreases your creditworthiness. As a result, the credit may not consider you eligible for any more transactions via credit cards.

Moreover, if you keep your credit card unused for a long period without paying any annual fee, the creditor may deactivate your account. 

What to Do If Your Credit Card Gets Declined?

If your credit card purchase was declined, you should contact the respective lender to get to the root of the issue. If the problem arose due to any of the factors stated above except a technical glitch, you must immediately consider reviewing your credit behaviour. Thereafter, if you detect any discrepancy you must immediately take necessary actions.

You can contact customer care to settle any dispute related to currency exchange or transaction options, or start working on repaying your existing credit card debt. Once your credit scores stabilise, you can request a fresh credit card with better deals.

Lastly, you must always keep an emergency funds backup like cash, or enough savings to afford CC repayments.

Final Words

There are several ways through which you can avoid a “credit card declined” situation. You can set transaction limits on your credit card and keep an emergency debit card in case your payment gateway is down.

Furthermore, if you feel you are spending anywhere above 30% of your credit limit, you may avail premium cards with higher credit limits. However, remember to check the joining and annual fee to see if it fits well with your finances and eligibility.   

Frequently Asked Question

What is tokenization?

Tokenization converts your credit card information into digital tokens. This way, no one other than your creditor will have access to your credit card information. Furthermore, it eliminates the hassle of entering your credit card details for every purchase.

What is the benefit of tokenization?

According to financial experts, tokenization is a safe and secure process. This is because the actual card details are not being shared with the merchant when the transaction is taking place.

What are the interest rates on credit cards in India?

The interest rates of credit cards in India may range from 12% to 48%, based on the type of credit card availed.

What if I do not pay my credit card bills?

If you do not pay your credit card bill, the bank will send you notifications for 6 months. Thereafter, it will deactivate or block your account and mark you as a defaulter, which would crash your credit score. If you still do not repay your loans, the bank has the right to seek legal action.

Was this helpful?

Samarth Tandon

Investment Principal
Worked with more than 50 institutions for their Debt raise post MBA. Previously worked with Northern Arc, Unitus Capital, Nomura and Darashaw.

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