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.
"Unusual activities" that jump out to 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.
- An unusually large purchase – say for a major appliance, furniture or jewelry. 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.
- Making large purchases outside your geographic area.
- Multiple out-of-town purchases in short succession. (Always tell your card issuer when you'll be traveling.)
- 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- Outdated or incorrect personal information – for example, when you're asked to enter your zip code at a gas station.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.
- 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 doesn't arrive, 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.
- 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.
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.