What is Merchant Override Decline?

As a merchant, I want operations to run smoothly and costs to stay low. That’s why I looked into merchant override declines.

Here, I’ll break down what they are. Their causes. Prevention strategies. And consequences.

Let’s begin with what these declines are.

Key Takeaways

• Merchant override declines block approved payments due to acquirer fraud concerns.
• PayPal’s Buy-Now-Pay-Later adoption grew 400% between 2019 and 2021.
• Common triggers: expired cards, insufficient funds, or CVV mismatches.
• Fraud flags arise from IP mismatches or multiple devices.
• MCC restrictions block transactions in high-risk industries.
• Frequent declines harm reputation and may result in account termination.
• Issuer declines differ from merchant declines and come with rejection codes.

What Is Merchant Override Decline?

A merchant override decline happens when a merchant’s bank or payment processor blocks an already-approved credit card payment. This occurs despite the card issuer's initial authorization.

We’ll explore the causes soon.

But first, let’s cover what acquirers are.

Summary: An acquirer blocks a purchase.

What Is an Acquirer in Payments?

An acquirer is the financial institution that enables businesses to accept card payments. They act as the link between merchants and the payment network. Acquirers handle the technical and financial aspects of processing transactions.

Other responsibilities include:

• Processing transactions: They forward transaction requests to networks like Visa. These networks seek issuer approval.
• Depositing funds: Acquirers handle settlements. They ensure merchants get paid after deducting fees.
• Managing risk: They monitor fraud, chargebacks, and unusual activity to protect merchants.

Services like PayPal or Stripe also act as acquirers. For instance, if you had a chargeback to deal with, they’d be your go-to. They tell you when there’s a chargeback, pass on your evidence to the issuer, and let you know the issuer's decision.

How does merchant override decline play into this?

Acquirers block transactions flagged as risky — even after the issuing bank approves. Fraud prevention tools and rules detect suspicious patterns. These systems shield merchants (and acquirers) from non-compliance or fraud risks.

Let’s unpack the reasons behind these declines.

Summary: The merchant’s payment processor.

Glossary:

• Issuer: The bank that provides the customer’s card.
• Underwriting: How acquirers evaluate a merchant’s risk.

What Causes Merchant Override Declines?

Merchant override declines happen for several reasons:

1. Insufficient funds: The customer’s account balance is too low.
2. Expired card: The card is invalid due to its expiration.
3. CVV failure: The entered CVV doesn’t match the card issuer’s records.
4. Suspected fraudulent activity: Unusual patterns or mismatched security details flag the transaction.
5. Merchant category code (MCC) restrictions: Transactions are blocked due to industry classification or network rules.

Let’s explore each cause in detail. Plus, I’ll share tips to prevent them.

1. Insufficient Funds

This rejection occurs when a customer’s account balance can’t cover the transaction. Or if they exceeded their credit limit.

Prevention:

Encourage customers to use another payment method. Messaging them directly can reduce churn. Or, turn this into an opportunity.

Offer Buy-Now-Pay-Later (BNPL) options. These allow customers to split payments over time, making purchases more affordable. BNPL may also attract new buyers who would otherwise hesitate to make large purchases.

It’s growing in popularity. PayPal reported a 400% increase in BNPL use from 2019 to 2021. Most users were between 25 and 44 years old.

But what if the card itself is no longer valid?

2. Expired Card

The entered card has passed its expiration date. And an expired card can’t validate transactions. 

Prevention:

Enable automated card updates through Account Updater services if your processor supports them. Or. Send reminders before cards expire. Allowing customers to update their payment details proactively.

Sometimes, though, the problem isn’t the card. It’s how the details are entered.

3. CVV Failure

A CVV failure happens when the Card Verification Value (CVV) doesn’t match the issuer’s records. This security measure ensures the cardholder’s identity.

Other terms for CVV include:

• CSC: Card Security Code
• CVC: Card Verification Code
• CVV2: Card Verification Value 2
• CID: Card Identification Number

Prevention:

Prompt customers to double-check their CVV entry.

But even accurate information may trigger fraud detection systems.

4. Fraud Detection Flags

Payment processors use fraud detection systems to identify risky patterns.

They may flag transactions for:

• IP addresses that don’t match a customer’s usual location.
• Frequent purchases from multiple devices.
• Abrupt changes in buying habits.
• Use of anonymizing tools, like VPNs.

Prevention:

Invest in fraud detection tools that monitor IP addresses and device consistency. Share information about expected transaction behaviors with your processor. Also, add secure verification measures like two-factor authentication to minimize false flags.

Check out our guides that compare security-boosting apps for Stripe and Shopify.

In some cases, declines happen not because of patterns, but due to your business category.

5. Merchant Category Code Restrictions

Acquirers assign businesses an MCC based on their industry. Some industries face restrictions due to high risks or regulatory requirements.

For example, merchants under MCC 7995 (online gambling) may encounter frequent declines. Other risky MCCs include cryptocurrency services (6051) and adult entertainment (5967).

Even legitimate transactions may get blocked due to these restrictions. Acquirers impose them to prevent fraud, money laundering, or compliance violations.

Prevention:

Take these steps to prevent MCC-related declines:

• Verify MCC accuracy: Confirm that your business is assigned the correct MCC. Misclassification into a high-risk category can lead to declines.
• Understand restrictions: Research specific rules tied to your MCC.
• Offer alternatives: Accept bank transfers, digital wallets, or other payment networks to bypass restricted cards.
• Educate customers: Inform them about potential restrictions tied to corporate or government cards.
• Partner with your acquirer: If you’re in a high-risk industry, discuss ways to optimize settings or contest unnecessary blocks.
• Monitor trends: Review transaction data regularly to identify decline patterns linked to MCC issues. Adjust your payment strategies accordingly.

If you have an MCC that’s restricted, there’s not much you can do. Other than to change your industry. The above tips should help a bit, though.

Okay, why are merchant override declines bad?

Consequences of Merchant Override Declines for Merchants

The following can result from too many merchant override declines:

• Reputation damage: Customers lose trust. Negative reviews spread quickly.
• Operational issues: Higher decline rates. Even account termination.

Frequent declines frustrate customers. Many won’t return. Worse, unhappy customers might share bad reviews. This harms your reputation — and drives away new clients.

Declines also make acquirers cautious. They might increase fees, monitor transactions, or even terminate accounts. Without reliable processing, business grinds to a halt. Or you might have to find processors who accept high-risk businesses.

These gateways come with higher fees and increased scrutiny on transactions.

What should you do if a merchant override decline happens?

How to Handle Merchant Override Declines

If a transaction is declined, request an override by contacting your payment processor. The processor will guide you on eligibility. If approved, this override can allow the transaction to go through. Provided you follow all security protocols.

You may have not encountered a merchant override decline, but instead, an issuer decline. Is that the same?

Merchant Override Decline vs. Issuer Decline

An issuer decline happens when the card’s issuing bank rejects a transaction due to reasons like insufficient funds or fraud suspicions. A merchant override decline is controlled by the acquirer or merchant's payment system.

Issuer declines fall into 2 types:

• Hard declines: Payment retries are impossible. The card is invalid.
• Soft declines: Temporary issues. Often billing address mismatches or network errors.

Issuer declines also come with codes explaining the rejection. Merchant override declines? Typically fraud suspicions.

At first, I struggled to tell them apart. Hopefully, this clears up the confusion.

What Is an Issuer Decline?

An issuer decline is when a customer’s bank blocks a card transaction and sends a code explaining why. The issuing bank may decline transactions due to suspicious activity, insufficient funds, or expired cards.

There’s not much else to this guide. Hope you learned something.

Wrapping Up

Merchant override declines happen when acquirers block suspected unauthorized transactions. Customers can’t finish purchases. Merchants lose revenue.

What if unauthorized transactions slip through?

Chargebacks follow. To prevent this, consider chargeback alerts. They notify you before disputes arise. Refund customers early, avoid penalties later.

We offer affordable chargeback alerts. Try them now.