Your customer did not cancel. Their card did.
It expired, or their bank replaced it after a fraud alert, or there was not enough in the account on billing day. Either way, the payment failed, and a customer who fully intended to stay is now one ignored email away from gone.
If your recurring payments keep failing, most of the fix is not about your customers at all. It is about how your billing is set up. Here is what is actually going on and what to change.
Why do recurring payments fail when the customer never cancelled?
Because the card you have on file stopped matching the card in your customer’s wallet. The most common reasons:
- The card expired. Every card does, every few years.
- The bank replaced the card. After a lost card, a fraud alert, or a data breach, the customer gets a new number and forgets you have the old one.
- Not enough money on billing day. Common with debit cards, and often fine a few days later.
- The bank’s fraud filter blocked it. A charge the customer did not start themselves, from a name they do not recognize, can look suspicious to a bank.
- The account was closed. The customer switched banks entirely.
Only the last one usually means the customer is truly gone. The rest are customers who still want what you sell.
“Try again later” versus “stop trying”
Every declined payment comes back with a reason from the customer’s bank. You do not need to learn the codes, but you do need to know they fall into two groups.
Some declines mean try again later. Insufficient funds is the classic one. The money may be there on Friday.
Some declines mean stop trying. The card was reported stolen, the account is closed, or the number does not exist. No amount of retrying will get those approved.
This matters for your wallet, not just your approval rate. Visa has rules about retrying declined cards. Retrying a “stop trying” decline, even once, can cost a fee on each attempt, and even the “try again later” ones have a monthly limit on how many times you can retry the same card. Those fees are charged to your processor and often passed along to you.
The question to ask your processor: “Does my billing system retry declines based on the reason the bank gave, and does it follow Visa’s retry limits?”
Is your processor updating cards for you?
Visa and Mastercard both run programs that do exactly what it sounds like. When a customer’s card expires or gets replaced, the updated card details can be passed along to businesses that have that card on file, so your next charge goes to the new card without the customer doing anything.
This is called an account updater, and it is the single biggest fix for failed recurring payments that most small businesses have never heard of.
If you are on Stripe, some of this happens automatically on many cards. On a merchant account, it is usually a feature of your payment gateway that has to be turned on, and there is often a small charge per updated card. For a subscription business, that small charge is almost always worth it.
The question to ask: “Is account updater turned on for my recurring customers?”
Make sure your charges are marked as recurring
When your gateway sends a charge, it can tell the customer’s bank, “this is a recurring payment the customer already agreed to.” Banks treat those charges differently from a random card-not-present charge, and they are more likely to approve them.
Most billing systems do this automatically. Some older setups, and some businesses that re-key cards through a virtual terminal every month, do not.
While you are at it, check your billing descriptor, the name that shows up on your customer’s statement. If a customer does not recognize it, their bank is more likely to flag it, and they are more likely to dispute it. I covered that in detail in my post on preventing chargebacks on subscription payments.
“I only have 60 members. Is this really worth fixing?”
Yes, and the math is why.
Say you have 60 members paying $99 a month. If three cards fail each month and nobody recovers them, that is $297 a month walking out the door. Over a year, it is more than $3,500, from customers who never meant to leave.
Small businesses feel this more, not less. A big company has a billing team chasing every failed payment. You have you, and probably a to-do list that does not include “check which cards failed this week.”
A simple routine for failed payments
You do not need software to start. You need a routine.
- Turn on account updater, so expired and replaced cards fix themselves before billing day.
- Retry “try again later” declines on a schedule, a few days apart, not five times in one afternoon. Timing a retry near the 1st or the 15th, when many people get paid, often helps.
- Stop retrying “stop trying” declines right away.
- Tell the customer quickly and make it easy. A short, friendly email or text the same day, with a link where they can update their card. No guilt, no threats. Most people just forgot.
- Look at the number once a month. How many payments failed, and how many you got back.
Frequently asked questions
Is a failed payment the same as a chargeback?
No. A failed payment means you never got the money. A chargeback means you got it and the customer’s bank pulled it back later. They need different fixes. If you want the full picture on the second one, here is what a chargeback is and what happens to your money.
Should I retry an insufficient funds decline right away?
Usually not. If the money was not there this morning, it is probably not there this afternoon either. Wait a few days, and aim for a likely payday.
Does account updater work on every card?
Not every card. Visa and Mastercard run the biggest programs, other card brands have their own, and some banks do not participate for every card. Ask your processor which cards your setup covers.
Can I see these problems on my merchant statement?
Often, yes. Retry fees and account updater charges usually show up as their own line items. If you are not sure what you are looking at, here is how to read your merchant statement.
Not sure how your billing is set up?
Send me your last three merchant statements and I will tell you what I see, including whether you are paying retry fees you do not need to pay. Start your free statement review here.
About the author: Julie Franke is a Certified Payments Professional (CPP) and has led Electronic Merchant Services since 2015. She has worked in payments since 2009 and specializes in helping high-risk and high-ticket businesses get approved, stay approved, and keep their money moving. EMS has served business owners since 2001.