E-Commerce · Credit cards

Process for declined credit cards from customers on monthly subscription/payment

Lindsay Holden Business Person

September 8th, 2013

What is the best process for updating customer payment information when a credit card is declined? (our customers are on monthly billing)  Any tips and tricks for how to deal with this at scale?  How do the biggest ecommerce sites deal?  (we use stripe)
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Jason Oliver Founder and Technology & Product Executive

September 8th, 2013

Hi,

The best way to deal with this at scale - is not to deal with it directly. I've recommend this to other start ups who were going to roll their own with stripe (which is a great product), however there are so many variations of the subscription business. I did this myself once and regretted it,  just the cost of development to get close to the basic features on the services don't even come close. Let someone do it who does it all day long do it for you, via an api:

recurly.com

chargify.com

fusebill.com

and focus on whatever you do well.

Best of luck.

Gil Benton Entrepreneur

September 8th, 2013

there is a lot to think about here.  Decline, charge backs, expiration dates, etc.  What you need to do is make sure that your credit card transaction provider FULLY understands your business model.  Based on the risk with declines and charge backs they can work with you / you can negotiate what rates and fees are associated.

Try to be as proactive as you can with expiration dates as well.  If you know the card is going to decline in April, then make sure you start to notify the card holder 45-30 days prior to expiration so they can update their payment profile in your system.

Scale is something that actually should help the problem, meaning if you have 100 customers and you have no idea how many will be declined monthly, then the transaction provider will not like that and charge you more... if you can tell them you have 1,000,000 customers and 16,000 will expire each month and you will have 1,000 declines, then they know how to model your risk and charge you appropirately.

Ray Dollete Tech Lead at PHENOMENON

September 10th, 2013

I would also suggest having a job that runs a report on declines the day after your monthly rollover and then use that list to trigger some branded communication from your ESP tool which guides a customer on how to update their credit card info and/or contact customer support.

Travis Workman Founder/President at Cognisoft

September 25th, 2013

There are a few ways to skin this cat. The first is to do some determination as to why the card was declined. Was it due to simply an expiration date, if so that is simple enough to work around by auto-updating the date in your system. Secondly most customers don't remember to update their CC information, so when a transaction is declined I would take the reason and clean it up and generate an email to the customer notifying them their transaction failed and to update and validate their CC information. Doing this gives you a unique opportunity to also get the customer to come back to your site for updates on your business or even to try to sell them another product. 

I have used various payment gateways and tend to do my own integration with them (I am a technologist so that is why I choose to roll my own solution). That being said if you don't have technical resources to do this or a budget to hire a technical person to do this, then look at your merchant provider and see what options they have to handle this as most have a way to do this for you for a small cost per transaction.