What does “Do Not Honor” mean? Causes and solutions

When you process a customer’s card payment, your acquirer sends the payment request via the card schemes (Visa/Mastercard) to your customer’s issuing bank. The bank then evaluates the data it’s received and makes a decision on whether or not to approve the transaction.When processing a customer's card payment, your acquirer sends the payment request through card schemes like Visa or Mastercard to the customer's issuing bank. The bank then reviews the data and decides whether to approve the transaction.

Most transactions are approved, but there are times when the issuer declines the transaction. This decline is communicated through a two or three-character response code sent back to you. Often, your payment service provider (PSP) will provide a translation of this code to help you understand the reason.

This entire process occurs while your customer is waiting for approval. It's crucial to have a plan for handling declines, tailored to the specific code received.

The "05 Do Not Honor" code means the customer's issuing bank refuses to authorize the transaction. In the past, banks used this code for every decline reason, from insufficient funds to suspected fraud or canceled cards. This could account for up to 60% of your declined payments.

Recently, card networks like Mastercard and Visa have worked to improve visibility into the reasons for declines. This is beneficial because it provides more information to manage reattempts, improve customer interactions, and increase conversions. As part of this effort, Mastercard and Visa have set limits on the use of the "Do Not Honor" response by issuers, so you may have noticed a greater variety of decline responses.

As the name suggests, "51 Insufficient Funds" indicates that a customer doesn’t have enough funds in their account to complete the purchase. This is the most common decline response and can be particularly challenging for card-on-file "subscription businesses" that can't prompt customers to use an alternative payment method.

While you can’t do much if a customer doesn’t have enough money in their account, you can improve your chances by strategically timing your retries.

Optimize your billing around paydays

For subscription businesses, it's tempting to use the initial payment day as the reference for future billing. However, this might result in billing just before payday when accounts are low. Paydays vary by country; for example, people in the UK are usually paid at the end of the month, while in the US, they are often paid bi-weekly. By analyzing transaction success rates in different markets, you can make data-driven decisions about the best billing times.

Evaluate your checkout experience

For non-subscription payments, consider the message customers receive when they encounter an insufficient funds decline. A poorly handled message can lose the customer, while a well-crafted one can save the sale. Best practice is to suggest an alternative payment method.

Use partial authorizations

Partial authorizations, offered by Mastercard and Visa, allow you to collect the available balance in a customer's account and then guide them to use another payment method. This is commonly used for in-person payments, electric vehicle charging, and automated fuel dispenser payments but can also be applied to ecommerce or subscription payments to reduce insufficient funds issues.

Leverage network response information (Mastercard)

Sometimes, acquirers receive additional information from Mastercard indicating when to retry a "51 Insufficient Funds" decline. Your PSP should provide this as part of the Mastercard Merchant Advice Codes, helping you optimize your retry strategy.

You’re probably not the only business with which your customer’s interacting. They might have just made a large purchase on a high-risk website, or been on a huge shopping spree at 3am. In this case, it doesn’t matter how you format your approval request. The issuer may decide to decline your payment request as a byproduct of your customer’s activity elsewhere.

In most cases, a decline attributed to recent customer activity can simply be retried at a different time. It helps to be transparent to your customer; explain the reason the payment failed and suggest follow-up action. This, of course, will depend on the decline code: 

• Exceeds Withdrawal Amount Limit: Linked to a cumulative spend limit on your customer’s card, it usually means they’ve exceeded their pre-agreed spend limit that day.

• Exceeds Withdrawal Frequency Limit: Your customer has exceeded their transaction limit for the day.

In both cases, the best approach is to let them know the issue and recommend they contact their card issuer. Don’t attempt a retry on the same day.

Sometimes transactions fail because of an issue with the data that’s sent to the issuer. For example, an address verification service (AVS) or card verification value (CVV) mismatch. Or the lack of 3DS2 authentication performed on a transaction in scope of PSD2. The key with these is to find the data point that’s triggering the decline and then retry the transaction with the correct information.

All issuers will have fraud detection systems to identify suspicious activity and they naturally tend to err on the side of caution. Unfortunately, they also have no way of communicating to you why they refused the transaction beyond issuing a Suspected Fraud decline code.

In addition to declining the transaction, the issuer is also likely to put a (usually temporary) block on the card. In that case, the best approach is to ask the customer to contact their bank. These days, this can be as simple as clicking on a button in their banking app. We don’t recommend retrying until the bank has been contacted and the card unblocked.

If you take a look at the decline response codes you’ve received over the last few years, you might see the numbers of 82 Policy, 79 Lifecycle, and 83 Fraud/Security now exceed 05 Do Not Honor. These codes are specific to Mastercard and can be explained by the Mastercard Merchant Advice Code (MAC), which should be shared by your PSP.

• MAC = 01 is generally associated with a 83 Fraud/Security decline and means that new account information is available (i.e. because the card has expired or been canceled). Again, Account Updater or network tokens can help mitigate this before needing to contact the customer for a different card.

• MAC = 02 is generally associated with a 82 Policy and indicates there’s issue is due to customer activity. Wait 72 hours before retrying to allow for counters/limits on the card to be resolved.

MAC = 03 is generally associated with a 79 Lifecycle decline and means the transaction can’t be retried. In this case, contact your customer and request an alternative payment method.

Processing payments for the likes of Uber and Spotify has taught us a lot about optimization. And, since all payments across all channels and regions are processed on the same platform, we have a wealth of data, which we feed into our machine learning algorithms. The result is a suite of smart tools, which work in the background to determine the best way to achieve an approval, while blocking fraud. Learn more about our payment optimization suite RevenueAccelerate or click below to get in touch.

Get in touch to learn more

We’d love the opportunity to explore how we can maximize your card approvals. Click here to get started.