We've all had these moments: You're at a romantic restaurant and the evening went great. But just as you and your date are readying to leave, an embarrassed waiter appears and whispers, "I'm afraid your card has been denied." So much for romance.
The same thing can happen at the grocery store, when shopping online or worst of all, when you're traveling and don't have a back-up means of payment. Why do credit card transactions get denied and what can you do to prevent it?
Banks and other credit card issuers have developed complex algorithms that track credit card behavior and highlight unusual usage patterns commonly associated with card theft or fraud. They also track purchases and holds made on your account to ensure that you don't go over your credit limit. Besides exposing you to penalty fees and possible higher interest rates, exceeding your credit limit can seriously harm your credit score. "Unusual activities" that jump out to credit card issuers include:
- When you ordinarily use your card only rarely, but suddenly make several charges in one day.
- Making multiple purchases at the same store (or website) within a few minutes of each other. (Keep this in mind if you buy items separately at different counters within one store.)
- An unusually large purchase -- say, for a major appliance, furniture or jewelry. To avoid such problems, alert your card issuer before making large purchases.
- One small purchase quickly followed by larger ones. Thieves will test the waters to see if a small purchase is denied; if it's not, they'll quickly run up major charges.
- Exceeding daily spending limits. Some cards limit how much you can charge per day, even if you have sufficient remaining credit. Check your card's rules if in doubt.
- Making large purchases outside your geographic area -- for example, say you're visiting your daughter in another state and you buy her a refrigerator.
- Multiple out-of-town purchases in short succession. (Always tell your card issuer when you'll be traveling. There's usually a menu prompt on their toll-free number or website.)
- International purchases, whether online or while traveling. In fact, some card issuers automatically decline international transactions because of the high potential for fraud, so learn your issuer's policy before attempting one.
Other common triggers for credit card denials include:
- Outdated or incorrect personal information -- for example, when you're asked to enter your zip code at a gas station. Always alert your card issuer whenever you move.
- Also, make sure you don't mistype your credit card number, expiration date, security code, address or other identifying information. Doing so several times in a row could inadvertently freeze your account.
- Expired card. Always check the card's expiration date. You should receive a replacement card several weeks beforehand. It's often mailed in a plain envelope, so be careful what you toss. If the new card hasn't arrived by the expiration date, contact the issuer to ensure it hasn't been stolen.
- You've reached your credit limit. For the sake of your credit score, try to keep your overall and individual card credit utilization ratios (credit available divided by amount used) as low as possible -- ideally below 50, or even 30, percent.
- A temporary hold has been placed on your card -- say for a rental car or hotel reservation -- that puts you over your credit limit. Always ask whether a hold will be placed, how much and for how long, and factor that into your remaining balance calculations.
- You miss a monthly payment. Card issuers may let this slide once or twice, depending on your history with them, but eventually if you don't make at least the minimum payment due, your card will probably be frozen. If you're consistently late making payments, you might even see your credit limit lowered or have the account closed.
- The primary cardholder made changes on the account and forgot to tell other authorized users -- for example, reporting his or her card stolen, lowering credit limits or removing you from the account.
A few additional tips to help ensure smooth credit card transactions:
- Make sure your card issuer has your cellphone number so they can call or text you at the store to verify a purchase before denying.
- Store your card's customer service number in your phone so you can easily reach them if there's a problem. (This number will usually appear on the back of the card.)
- Whenever traveling, carry at least two credit and/or debit cards in case there is a problem with one of them. Switch off between them, especially if you're approaching one card's credit limit.
- Before traveling abroad, find out your card's policies on being used abroad, including foreign transaction fees (flat fee or percentage of purchase, if any), foreign ATM fees, cash advances, etc.
- Carefully review your monthly statement for any errors or fraudulent activity.
On last thought: If your card is denied, don't shoot the messenger -- he's only following instructions. Rather, call the card issuer and find out what happened. Embarrassment aside, it's nice to know that someone is trying to ensure your card isn't being used fraudulently.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
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