About Credit Card Charges After a Declined Payment

This is an annoying ecommerce situation that comes up once in a while. It goes like this:

1. You try to buy something online, like one of my books. Thanks for that!
2. The purchase fails. Your card is declined. It’s not clear why. As far as you know, your card is fine.
3. And yet a charge then appears on your statement! And you still don’t have what you ordered!

Fortunately, you haven’t actually been charged, despite appearances! The “charge” on your statement is actually a temporary, tentative “authorization” for a charge that will never be confirmed. It will vanish in hours or days. I will never get paid that money, and you will never be billed for it.

What to do

Contact your credit card company and make sure that the next attempt will succeed … and then try again. While you’re talking to them, verify that the “charge” you see on the account is actually unconfirmed and temporary. They may be able to nuke it immediately, or tell you when it will automatically disappear.

The ugly details

This happens because your card company responds to the charge attempt with a decline code initially, but not all declines are outright refusals. Some are more like a “warning,” and a tentative authorization for the charge is generated, waiting for confirmation that usually never comes. (It never comes for some kinds of purchases. But in some cases, it may be convenient for a business to confirm it later.)

These warnings usually kill the deal outright: my payment processor wants nothing to do with charges that are only “maybe” okay. They won’t take the money at that point even if the credit card company gives it a green light. The authorization is doomed to never be confirmed.

So the authorization is then in limbo, and here’s the part that really confuses customers: it often looks just like a real, confirmed charge. On some credit card websites, there is no indication that it’s unconfirmed. My own credit card company does a fine job of visually seperating authorizations from confirmed charges, but many other companies do not! So annoying!

Worst case scenario

I once had a customer whose card company told her the charge was a real charge. Arg! She just talked to the wrong employee, who gave her bad info. But it did disappear from her account a week later.

You can always refuse any charge: the “chargeback” superpower

You can reverse any credit card transaction before you pay your bill. This is called a “chargeback” or a “disputed charge.” It is literally possible to buy stuff with a credit card and then just dispute the charge. If you did that with a large legit charge for a physical product, you’d probably get sued by the vendor, and you’d probably lose, so it’s not exactly a way to get free stuff. But it happens with smaller and digital products all the time, and it is a terrific and little-known insurance policy for online shoppers.

Because you can dispute any charge, you never really need to worry about a bogus charge in the short term. If it doesn’t disappear, you just tell your credit card issuer to reverse it before you pay the bill.

The Planet Money podcast had an interesting episode about chargebacks.