What are Soft Decline vs Hard Decline?

Soft declines are temporary transaction holds issued by a card network or issuing bank, typically related to a present processing event. In many cases, the payment can still be completed successfully with a later retry. Hard declines occasionally coincide with payment method concerns, indicating a benefit from considering alternative approaches.

Understanding the difference is essential because the most effective recovery strategy depends on the type of decline. Appropriate responses can affect recovery rates, fraud alerts, and customer experience.

Soft declines often stem from transient or easily corrected issues, suggesting that payment completion remains possible with retries or minor adjustments:

• The available balance is less than the purchase amount; however, the transaction can proceed when funds are accessible.
• When a card expires, the associated payment method is no longer valid, but the customer account remains active and available for payment updates.
• Bank or payment network services may be briefly interrupted as a result of routine system maintenance or updates.
• CVV or AVS mismatch occurs when the provided security code or billing address differs from the bank’s records, which can sometimes stem from a simple data entry mistake that is correctable.
• Velocity limits — the card issuer may temporarily pause additional transactions after several payments in a short period as part of standard security protection.

Example: Scheduled bank maintenance may lead to a temporary change in the processing timeline for customer subscription payments. After the system restoration the next morning, the payment proceeds through processing, potentially minimizing further customer involvement.

Hard declines are valuable signals that help identify when a payment method needs attention or updating. While these transactions may not be resolved by retries alone, they direct customers toward a secure payment resolution.

Common examples include:

• When a card is reported lost or stolen, the issuer typically blocks the card as a protective measure, allowing the cardholder to resume payments with a replacement card.
• Invalid account number — the payment details may be outdated or entered incorrectly, and can be resolved by updating the card information.
• Closed account — the previous payment account is no longer active, allowing the customer to switch to a new preferred payment method.
• A correlation may exist between the reduction of fraud protection denials and the bank’s security system responses to potentially suspicious activity.

Ejemplo: A subscription service might identify that a customer’s previous card was reported stolen approximately two weeks prior, allowing the customer to update their payment method and continue service. With the card deactivated, the customer can update their payment details with a new card to resume service.

Because​‍​‌‍​‍‌​‍​‌‍​‍‌ soft declines indicate that a customer’s card issue is most likely temporary in nature, a structured retry approach has the potential to recover a large portion of the failed transactions:

1.   It is suggested to pause before retrying; a 24–72 hour delay before reattempting the transaction is recommended.
2.   Use smart retry logic — at the same time, do not rush to retry and consider different presentation times for the attempts (e.g., day 1, day 3, day 7) so that you do not set off the fraud filters.
3.   Deploy Account Updater — services the card networks (Visa Account Updater, Mastercard Automatic Billing Updater), which can automatically update card details after the card has expired or been reissued.
4.   A dunning email can inform the customer of the payment issue and request updated payment details, aiming to minimize customer concern.
5.   Limiting total retries aligns with the general guidelines of most card networks, which advise against more than 3-4 attempts in 30 days.

Following a hard decline, pausing retries and considering alternative approaches represents a potential strategy.

1.   Ask the customer to give a new payment method — you can do this through an in-app notification, email, or SMS.
2.   Presenting information with empathy and directness can be helpful; for example, conveying “We were unable to process your payment at this time” may be perceived differently than “Your card was declined.”
3.   Explain the payment break, notifying the customer that they should provide updated payment information within a reasonable timeframe (e.g., 7–14 days) to maintain account access.
4.   Keep the decline code — with the help of hard decline codes (e.g., 41 = lost card, 43 = stolen card), it should be easier to understand the scenarios and strengthen your fraud prevention efforts.

Recovery rates depend on the field of business and the retry actions; however, here are some rough estimates:

•       Soft declines: A smart retry mechanism may recover a portion of  initially declined transactions, with some platforms reporting recovery rates up to 60% for insufficient-funds declines if retries occur at appropriate times.
•       Hard declines: Customer recovery is frequently observed when a different método de pago is used. Gestión de impagos campaigns, when appropriately timed, may result in the recovery of some churned customers following updates to their billing information, with observed rates between 10–30%.

This is another proof of how lucrative it is in terms of money to identify your customers’ decline at the failure point.