Failed Credit Card Payments Could be Hurting Your Company

JetPay Communications

December 13, 2018

As a business that relies on member subscriptions, you are also relying on your members’ credit card payments to go through month after month, or year after year. The problem, though, is that these credit card transactions can fail. Missing those charges could mean going without a substantial percentage of your company’s monthly or annual revenue. It could mean time-consuming credit card retries and follow-ups with members. It could mean high membership churn rates.

Simply put, failed credit card transactions could be hurting your company. They are also probably having a bigger impact than you think. Per Membership Services, Inc., failed credit card payments account for up to 10 percent of the average subscription service’s monthly membership charges. These failed charges are avoidable, but in order to avoid them, you need to understand why they occur in the first place and why they are such a challenge to eradicate.

Why Failed Credit Card Transactions Occur

Many business owners who rely on membership payments assume that the top reason behind their failed credit card charges is expiration. It stands to reason that, if a member’s card has expired, charges on that card will no longer go through. If you look more closely, though, you will probably see that many of the cards that are being declined on your charge list have not expired. What’s happening here?

The issue is that, increasingly, consumers don’t even reach the expiration dates on their credit cards. Data breaches of major companies have forced many consumers to cancel their cards and request new ones. In some cases, the card companies have even replaced consumer cards of their own accord. Credit card companies have also been making the switch to chip cards—an upgrade process that is mostly complete now, but one which also led to many credit card companies replacing customer cards well ahead of their expirations.

Some of your members will be vigilant about updating their card information if and when they receive replacement cards. Others, though, might forget to update their card information in your system, or put off those updates for several months after receiving new cards. The result is that your business will end up dealing with a slew of declined transactions for cards that are no longer valid.

It’s also important to remember that transactions can fail if the customer’s card is ‘maxed out’ or close to the credit limit. Trying to guess at when customers will make their credit card payments—and planning your subscription charge date accordingly—is therefore an important part of the equation.

Avoiding Declined Credit Card Payments

So how can your business avoid customer credit card payments that don’t go through? Try these strategies:

  • Test charge dates: Play around with when you charge subscription member cards each month. As a general rule, card declines are less likely at the beginning or end of the month than in the middle. Most people pay their credit card bills at the end of the month. Trying to hit their cards right after they have been paid off is wise.
  • Make it easy for customers to update their own credit card information: Your website should include an easy and visible spot for members to update their payment information. If a card is declined and you need to retry it, an automated email system that points customers toward the update portal is a smart strategy.
  • Use VISA’s automatic updater service: VISA offers an automatic updater tool which can provide your business with updated consumer card information—including number, expiration, or security code changes—for your subscribed members. Read more about it here.

Don’t lose subscribers because their cards are no longer valid. Instead, use the above strategies or contact JetPay to fight failed credit card transactions and protect your revenues. You will be surprised at how much you can cut down on your monthly failed payments.

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