Many merchants may scroll through their merchant account statements to review their processed transactions and see unsuccessful payments with the code: ‘05: DoNotHonor.’ So why does the do not honor error code show up? Who’s to blame for the do not honor decline; the merchant, the banks, or the customer?
Unfortunately, the answer is not always straightforward. Most merchants have seen the standard credit card transaction code ‘05’, also known as the Do Not Honor code. While frustratingly vague, this code can be challenging to explain to customers waiting expectantly to complete their transactions.
In this article, we are going to go into detail about what does do not honor mean, some reasons why a do not honor decline occurs, how to fix it, and why it would be necessary for merchants to familiarize themselves with this error code and the reasons for its occurrence. We also offer some recommendations on how to mitigate the fallout in regard to the customer experience once a do not honor decline is fired off from the issuer.
What does Do Not Honor mean?
Decline code 05, also known as the do not honor code, indicates that the credit card issuer has declined the transaction. It occurs when the credit card authorization request returns a decline because the cardholder’s issuing bank refuses to validate the transaction.
There are a variety of reasons that prompt the issuing bank to send back the do not honor decline.
Some reasons for a do no honor decline
There are many issues that the do not honor code may be referring to. The code is very similar to the Error 404 code many online customers encounter on websites they are trying to make purchases on. Much like the error 404 code, the 05: donothonor code is used because even the issuing bank may not be exactly sure why the charge is denied. As a result, this error code is issued by the issuing bank message as a blanket response to encompass the long list of possible defects in the transaction or in the cardholder’s actions that may have caused it.
Some of the main reasons this code is most commonly used include the following:
- There is an outstanding preauthorization charge on the cardholder’s account, resulting in insufficient funds to process the current transaction
- The client has attempted to make this payment after a series of denials on behalf of their issuing bank. After those repeated attempts, the bank has decided to block any activity on the card, flagging it as a risk of being a stolen card or otherwise used fraudulently.
- The issuing bank is situated in a different country. As a result, the issuer has placed a geographical block on the customer’s card, blocking them from using it if they have not been informed that the cardholder may be traveling.
- In rare cases, the payment is flagged by the issuing bank’s fraud prevention team because the transaction appears unusual in nature for several reasons, such as the payment being processed late at night or at a unique time based on the cardholder’s traditional shopping patterns, several transactions having occurred together in rapid succession, or the amount being charged is unusually high based on the client’s spending history.
- The cardholder may be exceeding the card’s credit limit and thus cannot pay for the transaction.
- It’s also a good idea to check if the card is valid and whether the merchant or the customer has entered all the information incorrectly, as these errors could also cause a decline.
- There may also be a discrepancy in the security codes used. A mismatch between the AVS or CVC code on the card and what the cardholder or an employee entered when processing the transaction can also result in a do not honor decline.
- There may be a problem authenticating the transaction. 3D Secure is a security protocol that Visa and Mastercard developed to help reduce the risk of fraud in online credit card transactions. It is also known as the “Verified by Visa” or “Mastercard SecureCode” program.
For online purchases with a credit card enrolled in 3D Secure, the consumer may be prompted to enter an additional security code, usually sent to your phone via SMS or your email address. This code must be entered before the transaction can be completed, providing the cardholder with an extra layer of protection. 3D Secure is designed to verify the cardholder’s identity and ensure that the person making the purchase is the actual owner of the card. This can help reduce the risk of fraudulent transactions, as it makes it more difficult for someone else to use your credit card without your knowledge.
- At other times, a do not honor decline is the best way for the issuer to stop a transaction. The decline could stem from any abovementioned options and may be a precautionary effort to mitigate risk. However, in some instances where actual fraud is suspected, there are limitations around how the issuer can communicate that back to the merchant, based on an international standard messaging format called ISO 8583.
ISO 8583 is widely used in the payment card industry and is supported by many payment card networks, including Visa, Mastercard, and American Express. ISO 8583 defines a common set of data elements and rules for the exchange of payment card data between financial institutions. The standard is used for the exchange of payment card transactions and related messages between payment card issuers, acquirers, and other financial institutions. It is widely used in the banking and financial industry to facilitate the authorization, clearing, and settlement of payment card transactions.
There is a specific code issuer can use to communicate the potential of fraudulent activity, “59: Suspected fraud.” However, Visa maps a 59: Suspected fraud decline to the 05: donothonor decline option. The card network takes this action to avoid an uncomfortable or possibly dangerous situation in an in-store setting.
It is important to note that the 05: donothonor code doesn’t necessarily imply fraudulent behavior. According to an explanation issued by Visa, most Do Not Honor declines happened for transactions that had less to do with fraud than with a customer error.
According to Visa’s analysis of global declined transactions, do not honor declines are on the rise. In fact, 76% of all international do not honor declines were either a result of insufficient funds or do not honor.
How to fix do not honor declines?
The simplest solution is to ask the customer to use a different payment method or another card to process the transaction. If that is not an option, the next best alternative is to request the client that they contact their issuing bank and inform them of the transaction and the issue they are facing, explaining to the issuer any possible reason that may be causing the do not honor decline that is applicable for the customer. If it is the case, the customer should inform their issuing bank that the decline may be happening because they are traveling, are out of the country, and are trying to purchase a large ticket item that exceeds their usual spending behavior.
Finally, you can ask the client to wait for an extended period, for around three to four hours, before trying the transaction again. The client may attempt too many successive purchases simultaneously, failing card networks’ velocity checks.
Outside of the solutions outlined above, the unfortunate reality is that there are not many other options available for solving this error code as in most or almost every case, it is beyond rare to find out what exactly the specific cause for the error code to show up is.
Using automation to mitigate do not honor declines
Do not honor declines for online transactions can be a cause for concern for most merchants due to the potential loss of sales and customers, possibly permanently. Especially if the merchant cannot explain the reason for the decline, it’s possible that customers may attribute the do not honor decline to some issue with the merchant’s system. However, this does not have to be the case. Below are some potential solutions that merchants can use to fortify their processing platform to reduce any impact on revenue and customer relationships.
The first option is to over-communicate and start by sending automated emails to customers impacted by do not honor declines, informing them of the error code so you can work with them to remedy the situation. Proactiveness would be the best weapon to turn a skeptical, possibly angry, customer into one that views the merchant as a trusted partner and adviser.
Another solution would be to issue a coupon with a follow-up email to those customers explaining what happened, some potential reasons as to why do not honor decline may have occurred, and reminding them of specific steps they should have taken by now. If the client was trying to buy particular items on sale or other limited-time offers, explain to the customer that they will still be eligible for the offer, extending the limited-time offer for a certain number of days upon receipt of the latest email.
These automated outreach options are just some of the few ways merchants can stay proactive to mitigate the potentially adverse impacts of a complex transaction decline code. Once implemented, these options can immediately over-communicate with customers, not just for not honor code declines but for any possible error code or chargebacks. These efforts can go a long way in improving the customer experience and can be easily scaled.
The error code ‘05: DoNotHonor’ is very common and also vague in its appearance. Essentially Decline code 05, also known as the Do Not Honor code, is when the payment processing attempt results in a rejection of the transaction’s authentication because the issuer refuses to validate the transaction. The ability to pinpoint the exact source of the ‘05: DoNotHonor’ code is complex as there are many issues that this error code could potentially be referring to. The issuing bank issued the do not honor decline code as an umbrella code to encompass the long list of possible defects that may have caused it.
The best solution for the merchant when they receive these decline codes is to try to attempt the processing of the transaction again; if that doesn’t work, then it is recommended to ask the client to either use another card or pay by cash. The client should immediately try to contact their bank to resolve the issue.
Just because the code has shown up doesn’t mean you have lost the revenue. When it comes to online transactions, make sure your payment gateway is not experiencing any issues and communicate to your client about the error code. Most of the time, the do not honor code results from actions taken by the consumer or the merchant. Maybe the client didn’t inform the issuer that they would be traveling, resulting in a geographical block of their card. Perhaps the security code is being entered erroneously.
That’s not to say there is no cause for alarm, and merchants should not be vigilant. Just as there’s an increase in eCommerce sales and noncash payment methods, there has also been a spike in payments fraud. Merchants should be aware that do not honor code declines are very common, and they should have a firm grasp of what such a decline code means some possible reasons it occurs, and some steps to take to remedy the situation.
Categories:Credit Card Processing, Credit Cards