A "do not honor" decline code, also known as an issuer decline, may occur for a number of reasons. For merchants seeking to mitigate them, it is crucial to understand how and why issuer declines happen.
We’ve all been in a situation where a credit card transaction does not go through as expected. The message a merchant gets back from the bank is with a decline code that says, “do not honor”. This is known as an issuer decline and there are a number of reasons why it may occur. For merchants to be able to mitigate issuer declines, they need to understand how and why they happen.
Why Do Issuer Declines Happen and What Does “Do Not Honor” Mean?
There are many players throughout the course of processing credit card transactions: merchant, acquiring bank, credit card company, issuing bank, end user, and payment processor.
When all goes smoothly, transactions are authorized in mere seconds and the merchant eventually receives the funds. However, there’s always room for things to go wrong—and there are many reasons why a transaction does not go through.
Common culprits for “do not honor” declines include insufficient funds for a debit card purchase or available credit for a credit card purchase. Another might be if the end user is traveling and attempts to use their card in a different state or country; or, the end user and merchant are in different locations across the world. The issuing bank may raise a red flag and not allow the transaction to be approved. Issuing banks may also reject a transaction if they suspect potential fraudulent activity.
What’s really difficult about issuer declines, from the perspective of the merchant, is that issuing banks put most declines into one large bucket of “do not honor.” It’s a broad designation for the multitude of reasons a transaction is rejected.
The merchant may have no idea why the transaction did not go through, and the only way to find out is to contact the issuing bank directly—a massive undertaking, because merchant transactions are handled by a variety of issuers across the globe. These issuers also have their own systems and teams, which means not all are on the same page when it comes to certain procedures or technical updates.
When an issuer decline happens, the consumer is notified immediately. However, it falls on the merchant to engage with the consumer if they want to know why the decline occurred and how it can be resolved. This puts the merchant in a frustrating position, because they may not be able to tell the end user why the decline happened.
The end user can either choose to contact the issuing bank themselves to inquire about the rejection, or abandon the purchase altogether. This becomes problematic, especially in some high risk industries, where the end user may not want to disclose to the issuing bank what they are purchasing (e.g., adult entertainment).
Challenge of Getting More Specifics Beyond Do Not Honor
Ideally, there would be a joint effort among merchants, issuing banks, acquiring banks, and end users to arrive at a place where issuer declines would be more specifically identified via category codes—instead of the universal “do not honor” designation. Regulations to address this problem are being developed in Europe, but it could be several years before they are implemented.
Additionally, issuing banks really have no motivation to change the current protocol because it will involve much more time, effort, and resources on their part. Even if they wanted to, smaller issuing banks likely don’t have the bandwidth to implement specific error codes—either from a technology perspective or simply not having enough employees to unpack rejected transactions.
There’s also the fact that many people have multiple credit cards. If one doesn’t work, they have the option of using another. While the merchant ultimately gets their funds, counting on the end user to try different cards is not the best solution for the greater problem at hand.
What Can Merchants Do to Avoid Declined Credit Card Payments?
One way merchants can avoid excessive “do not honor” declines is to work to mitigate end user complaints and chargebacks: essentially, “fight” for their money. Issuing banks that see a merchant actively trying to resolve declines tend to trust that merchant more than one that easily gives up. Another tactic is to establish as clean a history as possible with issuing banks. This builds up trust in the merchant, which means more transactions will be authorized.
Merchants may also decide to implement 3D Secure on their website to ensure more transactions go through. Of course, this does put an added burden on the end user. An additional option is to consider accepting alternative payments like cryptocurrency. With crypto, issuer declines becomes a non-issue. An increasing number of merchants are turning to this solution as a way to reduce issuer declines.
At Vendo, we work to curtail issuer declines by working very closely with issuing bank partners on behalf of our merchant clients. Our team pushes for as many details as possible, so merchants can then take steps to resolve underlying reasons for ‘do not honor’ declines.
We also communicate with acquiring banks on declines because they are just as interested as merchants in knowing why a transaction was rejected. By enlisting the help of a third party payment processor, merchants can better understand the issuer decline process—as well as what they can do to avoid future declines.
The Bottom Line
Issuer declines will always be a thorn in a merchant’s side. The lack of transparency in the “do not honor” error code does not help. However, there are ways merchants can overcome issuer decline challenges and ultimately reclaim the revenue they’ve previously lost.
Contact us if you’re interested in learning more about how Vendo mitigates excessive issuer declines for our merchant clients. We also have a number of revenue growth tools merchants can benefit from.
About Vendo: Vendo offers comprehensive payment processing services to e-commerce merchants. Our innovative, AI-powered tools offer merchants simple, secure, and seamless payment solutions, along with expert customer support from integration to end-user concerns. Our expert team works 24/7 to shape your vision into reality.