Why Are Some Credit Card Transactions Declined By Authorization System and What Does It Mean?


August 31, 2020

T1 Payments along with many other high risk merchant processors really wish we were able to solve the mystery of the very generic response “declined by authorization system” that card issuing banks send back to the payment processor when attempting to process a credit card transaction.

The standard banking procedures for credit card issuing banks historically has always been to be as vague as possible when defining a declined credit card transaction. For risk and safety reasons the card issuing banks do restrict charges on behalf or in favor of their cardholders.

Unfortunately, there is no merchant, PSP, gateway or acquiring bank, that actually knows what exactly the declined by authorization represents other than a reason for the card issuer to keep the merchants trying, the card holders safe and their shareholders happy.

Many Payment Service or Gateway providers have determined some possibilities of what “declined by authorization system means, but again they are all possibilities since no one has any concrete supporting evidence:
1. Insufficient funds / limit reached – the customer does not have enough available credit on their card to support the transaction
2. Risk system of issuing bank – the transaction failed the card issuing banks risk checks
3. Risk system of acquiring bank-– the transaction failed the acquiring banks risk checks
4. Other technical reasons including that the card is not enabled for online transactions, card is not enabled for international transactions or the customer has reached their daily spend limit on their debit card

Here are some suggestions on how to handle other technical reasons:
• Check if card enabled for online or international use (usually this feature can be enabled via the customers banking app
• Is tokenization or card storage allowed for card type
• Have customer confirm their daily spend limit on debit card

Last, but not least the final suggestion we would have is to have your customer call their bank and ask why specifically their transaction was declined and to see if they are able to allow the purchase to now go through?