Do not honor reject codes are common in credit card transactions (especially in eCommerce) and are often frustratingly vague. Merchants are left without a lot of information, and this can be a bit flustering — especially when you’re standing in front of a customer who’s trying to pay.
We’re going to cover what do not honor codes mean, the possible reasons your system may be firing one, and your best bet for resolving the issues.
What does do not honor mean?
A do not honor (decline code 05) fired by card-issuing banks like Chase means the customer’s bank will not validate the transaction and is refusing to send an authorization token back to your system.
In other words, the customer’s bank, for some reason, is saying no thank you to the transaction. The authorization is denied, meaning no funds will be transferred and that transaction cannot be completed. Okay. So if a transaction comes back as Do Not Honor… why?
Possible reasons for a credit card declined code 05
There are a few main reasons that a do not honor code are fired, some offering a bit more clarity than others:
- The customer has a hold on their card.
- The customer has multiple denied payments on their card in a row, so it has been locked until the customer contacts the bank.
- You are operating in a different country than the customer’s bank is.
- This transaction was caught in the issuing bank’s anti-fraud system for any reason. This could be an unusually large purchase or a purchase placed with a combination of odd factors (late at night, multiple orders within close proximity, etc.).
- The customer could simply not have enough funds.
Here’s the deal. Sometimes when a bank doesn’t have a clear reason why a charge is denied, it will opt for “Do Not Honor” as a sort of catch-all denial. This is especially true in older systems that aren’t as up to date as they should be. It’s just kind of the default bucket that issuing banks punt to when they can’t be more specific.
And just because a card was marked with Do Not Honor does not mean it’s being marked as fraudulent. In fact, most declined transactions aren’t related to fraud at all and are more commonly related to a customer error.
Here’s how Visa explains it:
The vast majority of declined transactions have nothing to do with fraud. Usually, they have a good risk score, but get turned down because of much more basic checks and balances. Visa’s Global Declines Transaction Analysis in 2016 has shown that more than 76% of all global transaction volumes that Visa issuers declined are tagged either as ‘insufficient funds’ or ‘do not honor’. In addition, some US$8 billion in card not present declines are due to ‘expired card’.
And continuing on…
The issue is that, in many instances, these declines are the result of somewhat arbitrary authorization decisions. For example, the cardholder may have inadvertently ended up on the wrong side of an authorization parameter (perhaps because, after a sudden spate of spending, they failed a velocity check); they may have forgotten to inform their issuer that they are traveling overseas (and stumbled into a geographical block); or, they may have reached the upper end of their credit limit (even though they have plenty of money sitting in their savings account).
In other words, you shouldn’t always accuse a customer of having made an error, but chances are it’s something on their end.
So what do you do when you’re in this situation?
What to do with a do not honor credit card transaction
There are a few options. Typically, employees will try the transaction again, which is fair, but it probably won’t have much of an effect on “do not honor” denials.
Assuming that doesn’t work, here are your basic options:
- Ask your customer to use an alternate card.
- Ask your customer to call or contact their bank and let them know about the transaction — especially if this transaction is happening outside of the country where the customer’s bank is located in.
- Ask the customer to wait a few hours and try again.
There aren’t many other options besides those, and unfortunately, you’ll probably never receive more information about why that transaction fired back a Do Not Honor code.
Using automation to mitigate do not honor damage
Just because a transaction fired a Do Not Honor in an online transaction doesn’t mean that revenue has to be lost forever. There are a few things you can build into your system to help reduce lost revenue due to failed transactions:
- Have automated emails for failed transactions that both notify the potential buyer of the failure and ways to remedy it.
- If a transaction fails, send a coupon to those people a day or two after the failed transaction with a similar message.
This is just scratching the surface, but having a comprehensive payment system that works for you in every possible customer situation goes a long way (especially at scale).
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