Credit cards are great tools that allow you to transfer and handle money safely and conveniently. Accessing your finances has never been smoother. But no tool is perfect, and it’s possible that you may find your credit card declined when purchasing something.
Credit card rejection happens for several reasons. Read on to learn more about those reasons, what to do when it happens, and how to prevent it from happening again.
7 common reasons your credit card is being declined
Your card can be declined due to human error, technological issues, fraudulent activity, and more. Here are some of the most common causes of credit cards being declined.
One: You've reached your credit limit. Most credit cards come with a predetermined credit amount. If you’ve “maxed out” your card, or spent up to this amount, you won’t be able to make any more purchases until you pay off your balance — either the minimum payment or the full balance. If you’ve ever seen “insufficient funds'' on a card reader, you know the feeling. Hitting your spending limit will negatively impact your credit score, and a lower credit limit is more likely to be exceeded. Credit usage contributes to 30 percent of your credit score calculation and is the second most important factor after your payment history. Experts recommend keeping your usage under 30 percent of your limit.
Two: Your card is expired. All credit cards have an expiration date on the front side. Usually, your credit issuer will notify you regarding the upcoming expiration date and send you a new card that you must activate. Expired cards are useless, but sometimes companies recycle the card number, so make sure you cut up the old card.
Three: There's a hold on your card. A “hold” is a pending transaction placed by companies like hotels or car rental agencies to ensure that a customer will have enough available credit to cover the cost of their services. The total amount that you owe is reserved to pay your bill when you officially check out of your hotel. A portion of your credit limit is then unavailable until this payment is made, so you may have access to less credit, and thus be unable to make new purchases.
Four: Suspicious purchases. Fraud protection has evolved over the last few years, with credit issuers stepping up the precautions they take to protect cardholders. These bodies can even identify possible suspicious activity made by your card, and they will notify you of anything strange. Make sure to review your statement regularly and contact your card provider if you find errors. Companies might also contact you about large purchases — even if the purchase isn’t particularly suspicious — just to make sure you made this purchase.
Five: Card exposed to threat. Similar to point number four, if someone steals your contact information or the company experiences a widespread data leak, companies may freeze your card for safety reasons. A frozen account prevents a third party from making unauthorized purchases. Unfortunately, this means you won’t be able to use the card either.
Six: Incorrect payment information. Perhaps you accidentally typed in the wrong PIN or the wrong CVV when making an online purchase. No worries if this is the case — be sure to double-check all the necessary information, then try again.
Seven: Traveling. Foreign transactions can be flagged, especially if your bank is not familiar with a purchase. They may lock your accounts just to be safe. Notifying your credit company of your travel plans in advance will save you stress — and extra fees — down the road.
What to do when a credit card is declined
Having your card declined can be embarrassing and frustrating, especially if you don’t have another way to pay. Don’t fret; more often than not, it is a straightforward issue to fix.
Written below are a few tips for you to keep in mind if this does happen to you.
Tip #1: Contact your credit card company.
Tip #2: Keep track of your expenses. This is where budgeting can be an enormous help, because it helps you to avoid overspending.
Tip #3: Always have more than one way to pay. Whether that’s keeping some cash with you or keeping a debit card on hand, it’s always better to be safe than sorry.
Tip #4: Reach out to a friend or a family member. There’s absolutely nothing wrong with asking for some help if you’re in a pickle.
Tip #5: Remain calm. Worrying won’t help anything, so take a breath. You may be able to place your item on hold and come back to pay for it later when you have enough money.
How to prevent a card from being declined
Step 1: Sign up for account alerts on a mobile app. Banks or providers can send you a notification immediately to inform you of any potentially fraudulent activity, or if there’s an issue with a purchase you’ve made.
Step 2: Use autopay. This can be an extremely beneficial way to avoid missing payments or making them late. The desired amount is automatically transferred from your bank account onto the card when paying your bills. This way, you will only have to worry about paying off additional purchases, like going to the movies or dining out.
Step 3: Pay off your balances each month. As mentioned previously, payment history is the single most significant factor in determining your credit score. Paying off your balance consistently will certainly boost your score. It will also help credit issuers to see you as reliable and trustworthy, and you’ll be able to keep borrowing from them.
Step 4: Pay attention to notices from your credit card issuer.
Step 5: Monitor your credit. You’re entitled to a free credit report from any of the three major credit bureaus, Experian, Equifax, and TransUnion annually, so take advantage of that. This is a great preventative habit to adopt in order to stay on top of things, to keep your credit in good standing, and to address any problems while they’re still minor.
While credit cards make shopping fun and paying bills easy, having one is still a big responsibility. Being able to handle the card wisely and having the confidence to fix any related problems, like a declined card, is essential.
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