What are Credit Card Authorization Rates and How do They Affect High-Risk Merchants?

In this article, we’ll take a deep dive into credit card authorization rates. We’ll explore the fundamentals of credit card authorization, what credit card authorization rates are, and how different merchant types (MCC codes) can impact these rates.

Let’s start with the basics.

What is credit card authorization?

In short, credit card authorization is a process that confirms a customer has ample funds for a transaction.

So when a customer goes on a website, fills up their cart with products or services, and presses something along the lines of “pay”—do you know what happens?

Well, each time they use a credit or debit card, a card authorization request is sent to the issuer to ensure that the card used is valid.

For the transaction to go through, the issuer must approve it—often through a credit card processor.

To ensure approval, a couple of things need to happen. First, the customer’s details must be correct alongside adequate funds in their account. Then, the amount of the transaction is subtracted from the credit limit of the customer.

And there you have it—authorization!

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But what are credit card authorization rates?

Okay, so now we know that each time a transaction is successful, the issuer considers the payment authorized. But what about credit card authorization rates?

Credit card authorization rates refer to the percentage of successful transactions a business experiences. These rates are determined by the ratio of successful to unsuccessful transactions as they pass through the authorization process.

For your business, it’s quite simple to work out your credit card authorization rates. All you need to do is take the number of successful payments and divide it by the total number of attempted payments.

There are many reasons why your percentages aren’t as high as you want them to be. And, as a high-risk merchant, you want to be diligent to ensure you’re not losing sales through unsuccessful transitions.

So let’s explore the next topic.


What are some reasons that credit cards decline?

There are many reasons why credit cards decline.

Each time a card declines, your business suffers as you lose out on revenue. And cards are more likely to decline for high-risk merchants (we’ll explore why shortly).

Let’s examine some of the most common reasons why credit cards get declined before discussing what you can do about it.

  • Not enough funds in the account. As discussed earlier, if a customer does not have adequate funds to make a transaction, the transaction will fail. There’s not a lot you can do about this.
  • Expired credit card. Again, this is not the merchant’s fault—a customer may just have an out-of-date card.
  • CNP (card-not-present vs. in-person). According to Stripe, online transactions have 10% lower authorization rates than in-person transactions.
  • Business type. Banks are highly likely to deem businesses that have subscription models high-risk. Although a reliable way to get consistent funds, sometimes the customer’s payment credentials may change — and the customer does not update them. The way around this is to utilize a service such as Visa’s account updater.
  • Issuing bank. Issuing banks will block a transaction for some of the reasons mentioned in these bullets, like potential fraud, expired credit card, and insufficient funds.
  • Fraud monitoring. Even if a sale is legitimate, a card is more likely to be declined online as a preventive process. It’s essential to know that credit card fraud can be carried by the cardholder and not just someone who doesn’t own the card. High-risk businesses need to be more vigilant of fraud, including “friendly fraud”, as it’s more likely to happen in their industries.
  • High-cost transaction. When a large transaction is attempted on a card, it’s more likely to decline because fraud tends to happen on a larger scale.

The best thing to do is mitigate some of the reasons why credit cards might decline, which will drastically benefit your business’s health.

What are the increased risks for high-risk merchants in payment processing?

There are increased risks for high-risk merchants in payment processing.

First of all, it’s good to know whether you're a high-risk merchant or not (in short, which payment processors consider you one).

To work this out, we shall first learn about MMC (merchant code categories), what they are, and what each categorization means for your business.

Once you understand how MCCs fit into your business, you will make better decisions to help your business.


So what is an MCC code?

An MCC code is a four-digit number that says your business category and what sort of services and goods you sell.

Because MCC codes are specifically related to high-risk merchants, there are more reasons why specific issuers might decline the code in the case of high-risk merchants.

These codes are assigned to merchants by credit card processors. After, payment service providers and acquiring banks can do things like assess the risk of your business, and set certain fees, etc.

Every card network has its coding. For example, Visa will have a different code than Mastercard. However, the codes are often quite similar. And, although you can apply for a specific code, you will still have to be approved for it.

To find out your specific code, contact your processor and request which one was assigned to your business.


But how do MCC codes affect payment processing for high-risk businesses?

MCC codes can make a world of difference in payment processing for high-risk businesses.

And these codes affect different aspects of your business. These are quite extensive, but here are some examples:

  • MCCs can be used to find out interchange rates. Visa and Mastercard, for example, will use MCCs to decide on what these rates will be. Know that different brands have different rates.
  • An acquirer will determine if it's high-risk or not through MCC codes once you, as a merchant, sign up for their services. (Examples of high-risk businesses are pharmaceutical, nutraceutical, adult, and subscription business.)
  • There are different chargeback protections for different MCCs. If you’re considered high risk, your chargebacks will likely come at a higher cost.

If you have any further questions about MCC codes, feel free to reach out to an L3 representative who will be more than happy to answer any questions you have.

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What are some best practices to help improve authorization rates?

There are a few best practices you can undertake to improve authorization rates.

One thing to do is to implement a recurring billing indicator. This can help stop the number of mistakes in declining, resolve payment processors, and quickly resolve banks’ issues. This option may be available to you, so double-check with your payment gateway provider,

You can also engage in something called proactive customer outreach. You can ask customers for up-to-date payments as soon as a decline happens. However, a better practice would be to reach out before the card declines! You can find out credit card expiration dates through a CRM query, and you can contact cardholders so they know they need to update their card information to continue their subscription.

You can make sure that customers use their checking accounts through automated clearing house payments. These are declined far less often than credit cards are.

You can even resubmit decline codes, and they may go through once you do that. If a customer doesn’t have the right amount of funds, it can be because they are late paying their credit card bill. However, you may not be able to do this frequently due to card network restrictions. If you are ever unsure, ask your payment gateway provider.



Credit card authorization rates are fundamental to pay attention to for high-risk merchants. The higher your rates, the healthier your business. We hope this article helped provide you with information on how these affect you and how to improve your rates.

Are you concerned about your credit card authorization rates? Well, L3 is here to help you. Feel free to reach out to one of our experts, who’ll help you with all your payment processing questions.


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