Most people dread being at a store or restaurant and having their credit or debit card declined. Chances are we have all experienced this at least once in our life. You’re embarrassed that your card declined as the cashier or your server tries to make an excuse on your behalf like, “we’ve been having problems with our credit card machine, do you have another card I can try?”
When we started selling Visa Gift Cards in 2004 they were still a relatively new product that not all consumers and retailers were aware of. As such, our customer support inquiries were relatively high at the time as card recipients or the cashiers were not always sure how to properly use them at checkout.
Today gift cards are the most popular gift to give for birthdays, Christmas, graduation gifts and many other occasions. Sales for network branded gift cards like Visa or MasterCard continue to grow each year with an estimated 16% increase in 2011 alone.
Each year our customer support questions continue to decrease, but there are still a handful of standard questions that we continue to see every day. Typically when a card recipient has a problem using their gift card for a purchase, they immediately believe there is a problem with the card itself.
In our experience, it’s rare that there is a problem with the card itself. Occasionally we’ve found that a cardholder may have inadvertently damaged the magnetic stripe on the back of their card thus making it unreadable. But more commonly, there are two main factors that contribute to a prepaid card being declined:
- Consumer Education: People see the Visa or MasterCard logo on their prepaid gift card and automatically assume it should work exactly like their existing credit or bank cards. But gift cards typically have a low value on them with no credit line or overdraft protection, so a purchase attempt of even $0.01 over the card balance will decline (excluding split tender transactions which I’ll explain below).
- Technology: A good portion of the existing credit card transaction systems and point-of-sale (POS) terminals that are used to process all card transactions (credit, debit, gift, & prepaid) where designed before network branded prepaid cards were popular, and as you’ll see from my examples below, could do a better job to make it easier on consumers & cashiers.
While the above two factors have improved by leaps and bounds over the past decade, there are still some scenarios where a gift card recipient may have trouble using their card. In no particular order, here are the top 4 reasons that your Visa, MasterCard, Discover, or American Express Gift Card may be declined and how to avoid this:
- Gas Stations: The next time you are pumping gas, take a look on the gas pump for a credit card authorization limit sign. When paying for fuel at the pump, nearly all gas stations pre-authorize your card for $75 – $125. Why? Because they don’t know how much gas you are going to pump and their technology is not smart enough to know what available balance or credit line is available on your card. So if you have a $50 gift card and you attempt to use it at the fuel pump, it will decline. To avoid this, take your card into the gas station and tell the attendant how much gas you would like to purchase.
- Restaurants: So you have a $100 MasterCard gift card and your bill at your favorite local restaurant is $90. No problem right? Unfortunately unless your server knows how to run the card properly there is a good chance that the card will decline. Why? Because the credit card systems at most restaurants are set up to authorize 20% ABOVE the check total to account for a potential tip. So the restaurant is checking to see if the card has $108 on it ($90 x 120%) which it doesn’t. To avoid this, you need to tell the server how much is on your card and that you’ll pay the tip separately if you believe your card does not have enough funds to cover the check amount plus 20%.
- Activation: Just like when you receive a new credit card in the mail, most network branded gift card require that you activate them before it can be used. This is a security measure in the event that the card is lost or stolen in transit. Sometimes this isn’t evident to the recipient because the purchase will remove the activation label prior to giving it to them. When you call the toll-free number on the back of the card you received, the custom service agent should be able to tell you if it has been activated or not and how to activate the card if needed.
- Insufficient Balance: This seems simple…if your card doesn’t have enough funds on it to cover your balance, you would expect it to decline right? But where the confusion comes into place is that many of the large retailers have updated their credit card terminals to recognize when a prepaid card is being used and ONLY charge the amount remaining on the card. They then ask for a 2nd form of payment (also known as a ‘Split Tender’ transaction) from the purchaser. Most small merchants however use older technology that doesn’t account for this. To avoid this issue, always know the balance on your card and let the cashier know before they swipe the card.
Overall card decline questions represent less than 9% of our total customer service calls and that number is dropping each year even as our sales continue to increase. With continued improvements in the credit card technology that merchants use to process transactions, we anticipate this number to be below 5% within a few years.