Can a merchant charge a fee if a customer’s card is declined?

This is not a common practice, and businesses can avoid it if they offer customers other payment options


Small businesses have a few options when a customer’s card is rejected. Follow local laws and card networks’ guidelines to protect your business and your customer base.

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Dear Your Business Credit,

Did you ever hear of a business charging a fee to a customer if the customer’s credit card was rejected?

Thank you for your assistance. – Bruce

Dear Bruce,

I haven’t heard of a business doing this. Generally, businesses will ask for another form of payment in these circumstances.

There are specific laws on when a merchant can add a credit card processing fee to a transaction, and the situation varies by state.

For more information, check out our story, “Credit card surcharges grow more common.”

If a card is declined, however, then no transaction has taken place. If it’s not possible to run the transaction through the system, then it would not be possible to charge a transaction fee to the card, either.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: How to get payment if a customer’s credit card is declined

What to do when a customer’s card is declined

That doesn’t mean there’s nothing a merchant can do when a card is declined.

The first step is to make sure there is nothing physically wrong with the card. One of my cards was recently rejected at a local market. I could not figure out why, as I’d actually paid the bill early and knew there was no other reason for a hold on the card (like a fraud report).

The sharp-eyed cashier quickly realized what was wrong: The chip had gotten dirty. I had brought that card with me to an outdoor event, and apparently, it was worse for the wear. Note to self: Clean that card!

What if the card is clean and in perfect condition? I’d try running it through again. Sometimes, a card may not go through because of a spotty internet connection in a store.

If you try running it through a few times and it still does not work, ask the customer for another form of payment.

If the customer does not have another card, offer to hold the merchandise at the counter so they can go to an ATM. That way, you will still be able to make the sale and they’ll be able to get what they need.

See related: Declined! Consumers share cringeworthy card failure stories

What to do with ‘card-not-present’ transactions

For a card-not-present transaction, such as a sale in an online store or an order taken over the phone, merchants should also ask for another form of payment. Never ship or deliver goods to customers until you’ve been able to process the card successfully.

Make sure you have followed the card issuer’s guidelines for verifying a card in this type of transaction, so you are not victimized in a fraud, or you could be out of luck if someone takes advantage of your trust.

For more on this, please see my past column, “Over the phone order turned out to be fraudulent. Can I avoid a chargeback?

There are, unfortunately, a lot of scammers out there who make the most of the relative anonymity of online purchasing to trick merchants. It’s such a big problem that new technologies are being developed to thwart it.

Declined credit cards can happen in any business. By being prepared to respond to them without getting frustrated, you can minimize the hassle and get back to doing what you do best: running your business.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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