Tom-Chris Emewulu
Chargeflow's Digital Evangelist
Table of contents

Credit card processors use the term “merchant override declines” to describe instances where a credit card company has approved a transaction, but the merchant's bank declines the request.

Simply put, a merchant override decline is when a merchant attempts to charge a payment, but their payment processor or bank rejects the request. Such declines may be due to an expired card, identity verification issues, or insufficient funds in the account.

Sometimes, you may encounter a situation where your payment processing systems decline a transaction even when the customer has sufficient funds. In such instances, you may be able to override the declined response.

Keep reading for guides and simple steps for managing merchant override declines without shooting yourself in the foot.

Understanding Merchant Override Declines: Causes and Simple Solutions

Before we delve into the fundamentals of merchant override declines, it's crucial to examine the meaning of transaction decline: what does it mean in simple terms?

Transaction decline is when a card issuer refuses to authorize a transaction on a cardholder's account. There are several reasons why transactions might be declined, including unusual activity, a balance close to or at its limit, a newly issued card that has yet to be activated, and more. A transaction can be declined by the card issuer, payment processor (acting on behalf of the merchant), or regulatory authorities (especially if the payment violates specific laws). Estimates from various sources suggest that declined card payments occur at a rate of 5-10%.

That said, merchant override decline is when your payment processor rejects a charging request you’ve initiated. For example, a customer inadvertently enters the wrong CVV while checking out. Your payment processing system will effectively flag the transaction as potentially unauthorized, leading to a decline, even if they have sufficient funds in the account, and the transaction will otherwise be permitted. This is a more nuanced form of an “Issuer decline” – an instance where the credit or debit card issuer declined the transaction.

Causes of Merchant Override Declines

Merchant override declines generally happen when your payment processor flags a transaction, which leads to a refusal of the transaction. Standard culprits for such triggers include, but are not limited to:

  1. Incorrect Payment Information
  2. Insufficient Funds
  3. MCC Restrictions
  4. Terminal Configuration Error

The merchant override feature protects merchants and consumers from fraud and unauthorized transactions. Some decline responses might be false positives, requiring you to contact the payment network about managing the card outside the typical payment gateway (i.e., manually correcting the issue with a code). However, other cases may demand a more hands-on approach.

Simple Solutions to Merchant Override Declines

As intimated earlier, a merchant override decline often requires manual intervention of authorization from the customer’s card issuer. If your account’s security settings caused the decline and you believe the transaction is legitimate, you can override the decline response. In other cases, you may need to contact the cardholder’s bank for an authorization code to override the decline and process the transaction.

Here are quick steps you can take to handle a declined transaction in different circumstances:

#1: Incorrect Payment Information (AVS/CVV Mismatch)

Transaction declines due to Address Verification System or Cardholder Verification Value settings may not necessarily be due to insufficient funds. In the absence of fraudulent transactions, the culprit may be a mismatch between the billing address and ZIP code or significant discrepancies in the CVV PIN code provided and what the cardholder has on their file.

In such situations, you could have the customer try the transaction again. If you believe the customer’s identity is genuine, you can also directly obtain a code from their card issuer or manually override your account's security protocols to force payment approval.

#2: Insufficient Funds Declines

If a customer lacks funds in their bank account to cover the transaction or has exceeded their credit limit, you can instantly send them a message to use a different payment method while they are still making the purchase. This improves the chances of them attempting the purchase again right away.

Alternatively, you can offer customers the option to use Buy-Now-Pay-Later (BNPL) services. This allows customers to spread out the cost of their payments over a period. For recurring payments, you can leverage data on customers' spending patterns to schedule payments to ease their burden and reduce declines.

#3: MCC Restrictions

Merchant Category Code (MCC) is a four-digit code that categorizes businesses based on industry types, such as computer repair, dental, and insurance agencies. Card issuing banks sometimes block credit card transactions if the cardholder uses the card at a location they consider unsuitable for that particular card type.

If you receive a transaction decline under this category, it indicates that the card has certain usage restrictions, which may limit where and how the cardholder can use it.

To override the decline, ask the cardholder to contact their issuer to discuss whether or not their card can be allowed at your business or have them provide another payment option.

#4: Terminal Configuration Error

If you notice recurring transaction declines or declines for transactions from a specific issuer, say Mastercard, Visa, or American Express, it might be due to a configuration error. In such cases, you should contact your processor to rectify the issue.

Be aware that accepting a transaction with invalid billing addresses and ZIP codes transfers all associated risks to you, such as chargeback and fraud, per industry regulations.

As a general rule of thumb when resolving payment declines:

  1. Wait for at least 24 hours before initiating authorization on the same card.
  2. For AVS/CVV/card limit issues, promptly inform the customer that their card is declined and suggest they use an alternative payment method. If the customer disagrees, instruct them to contact the card issuer.
  3. Perform a voice authorization when your payment system malfunctions or you receive a “Referral” response. Only the phone number used in earlier registration can provide valid voice authorization codes.

Final Thoughts on Merchant Override Declines

Merchant override declines may seem inconvenient for sellers and their customers because they interrupt the transaction flow. Estimates suggest that up to 44% of consumers abandon a purchase when faced with a decline, resulting in lost revenue and operational inefficiency for merchants.

Nevertheless, merchant override declines are crucial security measures that help to prevent fraudulent transactions, reduce unauthorized payment card use risks, and protect consumers from potential financial losses.

To minimize merchant override declines, ensure your payment processing systems are up to date – and equipped with the latest security measures. You should also comply with industry regulations and educate customers on payment best practices.


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