Jack Prenter, Founder of Dollarwise
In the daily lives of Canadians, credit cards are not just a convenience but a necessity. They facilitate everything from online shopping to paying bills. But imagine the moment when your trusted card is unexpectedly declined.
It’s not just an inconvenience; it can be a moment of confusion and stress. Understanding why this happens is crucial, especially since it’s a scenario many Canadians encounter.
Encountering a ‘credit card declined’ message is far from rare, and they’re not always due to insufficient funds. There are numerous reasons why a transaction might not go through, ranging from simple oversights to complex financial issues.
This article delves into the 10 most common reasons your credit card might have been declined.
Why does ‘credit card declined’ happen?
There are plenty of reasons that may have caused a ‘credit card declined’ message to pop up – some financial and some purely due to an accidental oversight.
Credit limit reached
When you’re notified that your credit card has been declined, a common culprit could be that you’ve reached your credit limit.
Every credit card comes with a preset spending limit, a maximum amount that the card issuer has agreed you can borrow. This limit is set based on various factors, including your credit history, income, and repayment habits.
Reaching your credit limit means you’ve hit the cap on how much you can spend on that card. If you attempt to make a purchase that exceeds this limit, even by a small amount, the transaction will likely be declined. This is a protective measure to prevent overspending and potential financial strain.
Suspicious transaction activity
Another reason your credit card may have been declined is due to what the issuer considers suspicious transaction activity. This often occurs when there’s a sudden deviation from your usual spending pattern.
For example, making a significantly large purchase that’s not in line with your regular transactions can trigger a security alert. Credit card companies vigilantly monitor for such anomalies to prevent fraud.
In cases where unusual activity is detected, the issuer might temporarily freeze your card as a precaution. This results in your payments being declined and your account becoming inaccessible until the situation is clarified. Such measures are in place to safeguard your finances against unauthorized use.
To circumvent this inconvenience, especially if you plan on making a large purchase, it’s advisable to inform your credit card issuer in advance. A heads-up allows the issuer to note this on your account, reducing the likelihood of your card being declined for suspected fraud.
Your credit card has expired
A straightforward yet often overlooked reason for a credit card being declined is its expiration. Credit cards come with a set expiry date, and once this date passes, the card is no longer a valid payment method.
To ensure continuity in your financial transactions, issuers typically send a new card to replace the expiring one well in advance of the expiration date. However, if a new card hasn’t arrived as your card’s expiry date approaches, it’s important to contact your credit card provider to rectify the situation.
Using an expired card, knowingly or unknowingly, will almost invariably result in a declined transaction. Canadian issuers usually mail out replacement cards three to six months before your current card’s expiry.
Upon receiving your new card, it’s advisable to activate it immediately. There’s no need to wait until the old one expires. Once activated, safely destroy your old card to prevent any potential misuse.
The card wasn’t activated
A new credit card requires activation before it becomes operational, and people sometimes forget to activate it, causing their card to be declined. When you receive a new card, it typically comes with a sticker providing instructions for activation.
This process is essential to start using your card and ensures security, as it confirms that the card has reached you, the rightful owner. Activation can usually be done by calling a dedicated number provided by the issuer or visiting a specific website.
This step is crucial; without it, your card remains inactive and will not be accepted for transactions. To avoid the inconvenience of a declined card at a crucial moment, make sure to activate any new credit card as soon as you receive it.
You are late on payments
Delayed or missed payments are a significant factor that can lead to your credit card being declined. Credit card issuers often respond to late payments by placing a temporary hold on the card. This action serves as a reminder and a safeguard, ensuring that overdue balances are addressed.
The hold is typically lifted once the pending payments are cleared. It’s a straightforward process: pay the due amount, and your card’s functionality is restored.
To prevent such scenarios, consider employing strategies to keep on top of your payments. One effective method is setting up reminder notifications. Many Canadian issuers offer this feature through their online banking platforms or mobile apps.
These reminders can alert you to upcoming payment due dates, helping you avoid unintentional delays. Another reliable approach is to set up automatic payments for your credit card.
This ensures that the minimum payment or a preset amount is automatically deducted from your bank account each month, mitigating the risk of missed payments.
Regularly checking your account online or via a mobile app is another proactive habit. This not only helps you keep track of your spending but also ensures that you’re aware of your payment deadlines.
Additionally, incorporating monthly payment reminders into your calendar can be a simple yet effective tool to keep your payments on schedule.
Card usage during travel
Traveling, whether domestically or internationally, can sometimes lead to your credit card being declined. This issue often arises when your card is used in a location that differs from your usual spending pattern.
Credit card companies are vigilant about such activities as they can be indicators of potential fraud. It’s not just physical transactions either; online purchases from international vendors can also trigger security protocols.
For instance, a sudden charge from a foreign restaurant or an international online store can be enough to raise a red flag with your issuer.
The reason behind these security measures is simple: protecting your financial information and preventing unauthorized use of your card. When your card shows activity in various locations in a short time span, especially in different countries, it signals to the issuer that your card may have been compromised.
In response, they might lock your account to prevent further transactions, a step taken to safeguard your funds and personal details.
To ensure seamless use of your credit card while traveling, proactive communication with your credit card issuer is key. Informing them about your travel plans, including the destinations and duration, can prevent these security triggers.
A quick call to your issuer, using the number provided on the back of your credit card, can make a significant difference.
Your account has been closed
This scenario can occur particularly with cards that haven’t been used for an extended period. Credit card issuers in Canada have the prerogative to close accounts that remain inactive for a certain number of months or years. This policy is a measure against potential fraud and to manage inactive accounts more efficiently.
To prevent your account from being closed due to inactivity, a proactive approach can be beneficial. One strategy is to link your credit card to a few regular expenses, such as a monthly streaming service subscription or your phone bill.
This ensures that the card is used consistently, albeit for small amounts. It’s important, however, to remember to pay off these balances each month to avoid accruing interest or affecting your credit score.
In some instances, an account may be closed by mistake or due to an oversight. If you suspect this has happened, the best course of action is to contact your credit card issuer directly.
They can provide clarity on the status of your account and guide you on the necessary steps to either reactivate it or understand the reasons behind its closure.
Incorrect CVC/CVV code
A frequent cause for a declined credit card, primarily in online transactions, is the incorrect entry of the CVC (Card Verification Code) or CVV (Card Verification Value) code.
This three- or four-digit code, typically found on the back of your card, serves as an additional security measure for transactions where the card is not physically present, like online purchases. Unlike in-person transactions that require a PIN, online transactions rely on this code to verify the cardholder’s identity.
Entering the CVC/CVV code incorrectly can lead to the transaction being declined. This mistake can happen quite easily, either through a simple typing error or misreading a worn-out code on the card. The physical condition of your credit card plays a role in this scenario.
Regular use and the friction from being stored in a wallet can gradually wear away the numbers, making them difficult to read or even completely erasing them.
To avoid such situations, it’s important to take good care of your credit card. Keeping it in a secure and relatively friction-free place can help preserve the legibility of the CVC/CVV code. If you find that the code on your card has become faded or illegible, contact your credit card issuer for a replacement card.
Your card is on hold
An often overlooked reason for a credit card being declined is the existence of a hold placed on the card, particularly common during travel or when making large purchases. For instance, when you check into a hotel or rent a car, the company may place a temporary hold on your credit card as a security deposit.
This hold, although not an actual charge, reduces your available credit limit. If this reduction isn’t accounted for in your spending plans, you might inadvertently exceed your credit limit, resulting in your card being declined for subsequent purchases.
The amount of the hold and the duration for which it remains can vary. It’s essential to recognize that these holds can take several days to be released after you’ve checked out of the hotel or returned the rental car.
During this period, your available credit might be significantly lower than usual. To navigate this situation, it’s advisable to have sufficient available credit on your card to cover these holds without impacting your regular spending.
A practical tip to manage your credit efficiently in such scenarios is to use different cards for different purposes. For example, consider dedicating one credit card for hotel bookings and car rentals, and another for your everyday expenses. This strategy can prevent putting too much strain on a single card’s credit limit.
Also, being patient and aware of the holds on your card is key. While you can contact your credit card issuer or the merchant to inquire about the hold, these are typically standard practices and require time to be processed and lifted.
Credit card terms were changed/adjusted
Your credit card’s terms and conditions can change, sometimes resulting in your card being declined. Credit card issuers periodically review your credit report and financial situation. If there’s a noticeable change.
particularly negative developments like defaulting on a different loan or a drop in your credit score, they may reassess the risk of lending to you.
In response, issuers can adjust your credit card terms, which could include increasing your interest rate or, more crucially, lowering your credit limit. A lowered limit might catch you off guard, especially if a purchase exceeds the new limit, leading to a declined transaction.
In Canada, credit card issuers are obligated to provide a 45-day notice before implementing such changes to your account. This notice is intended to give you time to adapt to the new terms and make informed decisions about your credit use. However, it’s possible to overlook or misunderstand these notices.
Therefore, it’s essential to regularly review any communication from your credit card issuer and understand how any changes might affect your account.
Credit card declined – what should you do?
Experiencing a credit card decline is never pleasant. If you find yourself in this situation, it’s important to have a clear plan of action. Here’s a step-by-step guide to effectively address the issue:
Contact your credit card provider
The first step is to get in touch with your credit card issuer. Look for a customer service phone number on the back of your card. This direct line to your issuer is your best resource for immediate assistance.
Provide relevant details
Once connected with a representative, inform them of your location and the nature of the transaction that was declined. This information can help the issuer quickly understand the context of the decline.
Inquire about specifics
Ask the customer service representative for detailed reasons behind the decline. Understanding the root cause is crucial for resolving the issue. Additionally, inquire about the necessary steps to restore your card’s functionality.
Pause further transactions
Until the issue is resolved, refrain from attempting more transactions with the card. Continuous use of a declined card can compound the problem, potentially leading to further complications with your account.