Hard and Soft Card Declines: Types and Ways to Optimise

Ever been on the verge of completing a purchase, only to have your card rejected with no clear explanation? Frustrating, right? For customers, it’s an inconvenience. But for merchants, it’s a potential sale slipping through the cracks.

What many don’t realize is that not all card declines are created equal. Behind those failed payments lie two main culprits: hard declines and soft declines.

Card declines are the uninvited guests of the payment world. But not all declines are the same. Some are non-negotiable. For instance, hard stops are no way forward. However, others are more forgiving, such as soft declines, which might be resolved by trying another payment channel or updating the same payment method details. Simply put, these are called hard declines and soft declines.

For merchants, knowing the difference is key to recapturing lost sales and improving customer experience. Last but not least, it helps businesses keep revenue flowing. Let’s break it down: hard vs. soft declines, what causes them, how they impact your business, and, most importantly, how to prevent them from stealing your hard-earned sales.

What is a Hard Decline?

A hard decline is the end of the road, as these payment failures happen when a fundamental issue with the card or account can’t be resolved. You can retry as many times as you can to reprocess the payment. But it won’t go through. The payment in such cases is permanently denied, and there’s nothing much that you or the customer can do.

Common reasons for hard declines include:

• Card reported as lost or stolen: Once a card is flagged as reported or stolen by the customer, it’s completely unusable as the bank blocks all the payments, irrespective of its nature (online or offline).
• Account closure: If the cardholder has closed their account, the account is officially defunct. And using the same payment method is pointless because it will fail every time.
• Expired card: The card is expired or is no longer valid. The customer might simply need to enter details for a new card to complete the purchase.
• Suspected fraud: If the bank or issuer identifies suspicious activity on the account, the payment method shuts down immediately for security reasons. Payments will be declined until the fraud is investigated and resolved.
• Violation, cannot complete: The bank is trying to complete but is facing an issue with the account. Because of this, the bank declines the payment and clearly will not approve another request, no matter how many times you try.
  In cases of hard stops, businesses have absolutely no choice. They need to ask the customer for a different payment method to complete the purchase of the goods or services. Retrying the same card repeatedly with the same decline code is useless.

What is a Soft Decline?

Soft declines, on the other hand, are more like speed bumps. The payment doesn’t go through, but it isn’t a permanent failure. Often, the issue can be resolved by reattempting the payment or fixing specific problems.

Common reasons for soft declines include:

• Insufficient funds: If the customer’s account doesn’t have enough money to cover the charge, the payment can be completed if they repay the outstanding amount to the bank.
• Invalid сard details: Typos or outdated card details can lead to this error. Double-checking the details before making the payment can work fine for you.
• Card not authenticated: The customer may have entered the wrong CVV or failed a 3D Secure check. Retrying payment with the right CVV may help complete the payment.
• Payment channel unavailable: Sometimes, the issue isn’t with the card or customer but with the payment network itself. Retry payment after some time to complete the payment.
• Temporary technical glitches: Issues like network timeouts or server errors can interrupt the payment. Retrying again with better work can do wonders in such situations.
• Payment not authorized: The bank hasn’t approved the payment, but trying again might resolve it. Contacting the bank and asking them to approve the payment can work here.
• "Do Not Honor" decline: The issuing bank has declined the payment without specifying a reason, often due to suspected fraud or account restrictions. Retry or ask the customer to contact their bank for resolution.

Unlike hard declines, soft declines leave room for action. Businesses can often recover these payments by reprocessing the payment, asking the customer to verify details, or waiting for a technical issue to be resolved.

Hard vs Soft Declines: Strategies to Reduce Failed Payments

As we know, soft declines are temporary blockades that can often be cleared with a bit of effort. However, hard declines are the end of the road with this payment method. Soft decline vs hard decline codes either point to something fixable (a soft decline) or indicate a more permanent issue (a hard decline). Understanding how to handle each type is absolutely necessary to keep the sales process moving smoothly.

How to Reverse Soft Declines

Here’s how to reduce or reverse soft declines:

• Inform Customers: Show the right reasons for decline in a timely manner, explaining what went wrong (like an expired card) and how to fix it. Most customers are happy to update their details when they know what’s needed and how to do it to complete the purchase.
• Use Cascading: Prepare a backup channel and route the declined payment into it.
• Retry the Payment Later: Timing matters. If funds are low or there’s a network issue, simply trying again after a while can fix the problem.

Please pay attention that despite some expert opinions, not all types of soft declines are suitable for payment cascading. For instance, cascading an “Insufficient Funds” decline is not practical despite it being a soft decline. In such cases, it is more effective to allow the buyer to retry the payment or select another payment method.

How to Reverse Hard Declines

Here are steps you can take to reduce how often hard declines happen:

• Verify Cards at Checkout: Double-checking details like the billing address and CVV during the payment process can catch hard decline issues before they become a problem during the payment.
• Stay Proactive: Send reminders to subscribers when their cards expire so they have enough time to update their details before making their next purchase using the payment method.
• Choose Reliable Payment Channels: Some payment channels have better fraud detection and approval rates than others. A good partner can make all the difference in reducing declines.
• Provide Direct Options to Retry: If one method doesn’t work, give your customers an easy way to retry the payments with another card or switch to another payment method. You can provide them with payment options such as a digital wallet or bank transfer to increase the chances of that sale.

Takeaway: Know How to Tune the Tech

We hope that by now, you have fully understood what soft decline vs. hard decline means for your business. Here, we summarize it again: Soft declines allow you to recover the sale, but hard declines don’t. The trick is to act quickly when the problem is temporary and work proactively with customers, banks, and payment gateway operators to prevent permanent declines before they happen.

Last but not least, you need to tie up with a payment gateway that makes you win in the payments business with no shenanigans but real dedication towards capturing payments, even the ones lost due to hard or soft declines.

At Spell, we work closely with our partners and consult them on several hidden details. These details help them mitigate financial risks related to soft and hard declines, increasing their probabilities of real success.

Well, for the unversed, Spell is the white-label payment gateway solution that provides businesses with payment tools that make revenue generation easier. The tools also help them optimize operating costs and provide their customers with an unmatched payment experience.

Handle a Demo Tour or schedule your Case Review and accelerate your business with the best white label payment platform on the market!

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