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Why Was My Credit Card Declined? 4 Common Reasons

Sept. 24, 2013
Credit Card Basics, Credit Cards
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One of the most embarrassing financial moments many of us will encounter is having a credit card declined. But while it’s certainly uncomfortable in a social sense, what’s more unsettling is when you’re not sure of the reason behind the merchant’s rejection of your card. When you use credit cards for day-to-day purchases, getting locked out can mean being unable to buy gas or groceries.

There’s no one explanation for why credit cards get declined — in fact, there are many. These are the four most common:

1. There’s been a suspicious purchase

Credit card companies have become savvy at recognizing fraudulent purchases made with your card; they’re often able to detect them even before you can. If your card appears to have been used far from your home or has been used to make multiple identical charges, that can trip the issuer’s fraud triggers.

However, the net that issuers cast to catch credit criminals is very wide — sometimes too wide. Credit card companies occasionally flag legitimate charges as potentially fraudulent purchase and freeze the ability to use the card they think might be compromised. They think they’re stopping a thief, but in reality you’re bearing the brunt of their caution.

Such misunderstandings can usually be cleared up with a call to the credit card company to verify that your card has not been compromised.

2. You’ve reached your credit limit

One of the most straightforward reasons your card could have been declined is that you’ve hit the card’s credit limit. The card company simply won’t let you borrow any more money until you’ve made a payment. Maxing out your credit card impedes your ability to make purchases, but it’s also bad news for your credit score. In general, it’s best not to exceed 30% of the available credit on each card, so if your credit card is maxed out, you’ve well exceeded that guideline.

In order to be able to use your card again — and keep your credit score from cratering — you’ll need to make a payment on it, pronto.

3. A hotel or rental car company has put a hold on your card

Think about the places you’ve used your card recently. If you’ve used your card to check into a hotel or rent a car, one of those businesses could be the culprit.

Hotels and rental car companies frequently place a “hold” for a certain amount of money on a customer’s credit card when the cardholder checks in or picks up a car. The purpose of the hold is to make sure the customer will have enough available credit when the final charges are calculated. For example, if you order a bunch of room service or raid the in-room minibar while staying at a hotel, the hotel might need to tack an extra $100 onto your bill, beyond the regular charge for the stay. A rental car company, meanwhile, might want to charge you for gas if you bring the car back empty. So they tie up a portion of your credit line with a hold.

The hold should be released when your final bill is tallied and charged to your card. But until it is, you might have less available credit than you think, leading to a rejection.

4. Your card has been exposed to a threat

Again, credit card companies have become very adept at picking up on potential identity theft. So if there’s a possibility that your card information was leaked or exposed, your card might be rendered temporarily unusable. If you’ve purchased something online at a site that wasn’t secure or used your card in a store that may have been the subject of a credit card skimming scheme, your issuer could take steps to keep your card from being used for unauthorized purchases — including freezing all activity.

If your card has been declined and you’re completely stumped as to why, get in touch with your credit card company — there’s a good chance they’re trying to protect you from a scam.