Why is my Target Red card declining

Applying the adage of “if it walks like a duck and talks like a duck,” the debit version of Target Red is raising some potential concerns among its users.

According to the assertions in a class action litigation in federal court, the Target Debit Card is not really a "debit card." The litigation contends that consumers may have been fooled into thinking the card worked exactly like every other debit card -- specifically, that if there’s money in a connected account, then it will be used to cover a transaction. For standard debit cards, a transaction will generally be cancelled or declined if there’s not enough money in the account.

However, this may not be the case for Target’s debit card. According to reports, it’s possible that even though the connected account has insufficient fees, a purchase using the Target Red debit card can still be be approved. The catch at that point is that such an non-sufficient funds (NSF) purchase can trigger a Return Payment Fee from Target on top of an NSF fee from a consumer’s bank. In some situations, those penalties can total more than $60.

But the fee snowball going down the hill doesn’t stop there. According to TopClassActions, Target can further attempt to submit the transaction through the consumer’s bank up to two more times. Of course, each of those tries can add even more fees from both Target and the bank -- as much as $100 -- if those attempts turn up as NSFs.

The fine print vs. what’s reasonable

In the class action suit of James Walters v. Target Corp., Target makes it clear that to become one of their debit cardholders, a customer must sign an agreement with Target that spells out various terms and conditions.

Walters, on the other hand, alleges that an "inherent feature of a debit card is immediate processing of a transaction by either seizing deposit account funds or declining a transaction."

Because a debit card can be immediately processed, Walters alleges it is impossible for a true debit card transaction to directly trigger overdraft or NSF fees by spending more than available funds.

Adding more fuel to Walters’ fire, he argues that that Target's practice of misstating the card as a debit card is intentional, focused on producing returned payment fees (RPF) fees and saving on automated clearinghouse (ACH) transaction fees by combining transactions together over a period of days and, then, processing them as a group.

At the core of this suit is the term "reasonable." In the judge’s order that both granted and denied parts of Target’s motion for reconsideration, the judge used "reasonable" eight times in explaining his decisions.

For example, in siding with the plaintiff, the judge wrote that "reasonable consumers are not required to look past misleading labels to clarifying fine print."

In partial favor to Target, the judge wrote that "a reasonable jury could conclude that Target exercised its discretion in bad faith by always delaying electronic funds transfers (EFT) and charging maximum RPF when [the Agreement] said only that [Target] may engage in such practices. Target contends that this ruling was clear error because the Agreement expressly permits such practices. Target's argument is partially correct."

Is Target the only one to blame?

Reports are that both Shell and Nordstrom debit card customers had the same experience as Target’s.

If you have a Target Red debit card and found that you were charged a return payment or insufficient funds fee from your bank, it’s possible you qualify to participate in a Target Red debit card class action lawsuit investigation which could recover reimbursement for fees, financial damages, and more.

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Finding out your credit card was declined can be embarrassing — not to mention worrisome.

But a card can get declined for various reasons, and it’s not always cause for concern. The most common reasons your card may be declined, according to Bola Sokunbi, a certified financial education instructor and founder of the personal finance website Clever Girl Finance, include not having any credit left on the card and fraud alerts on your account blocking new transactions. 

Apart from insufficient funds and suspected fraud, there are several other reasons why your card may be rejected. And you can take action to preempt many of them — or at least reduce the chances of your card being declined the next time you’re at a restaurant or you make an online purchase.

Always carry another form of payment with you, such as your debit card or cash, in case your credit card is declined.

Here’s a breakdown of why your card may be declined — and what you can do to prevent it from happening. 

1. You Reached Your Credit Limit 

Your card can be declined if you’ve hit the card’s credit limit, or the upper threshold of charges you can put on the card. It’s your bank’s way of saying you cannot borrow any more money until you make a payment. 

“Let’s say you have a $4,000 credit limit, your balance is $3,500, and you’re trying to put $1,000 worth of things on there — they’re not going to allow that to go through a lot of the time,” says Anna N’Jie-Konte, a certified financial planner and founder of Dare to Dream Financial Planning.

Maxing out your credit card hinders your ability to make purchases, but it’s also not good for your credit score and can lead to long-term debt. Plus, reaching your credit limit is detrimental to your credit utilization — the ratio of your credit card balances to your overall limit – heavily influences your credit score. You’ll increase your odds of having a good credit score if you don’t exceed 30% of the available credit on your cards, and ideally keep your utilization below 10%. Generally the less credit you use, the better it is for your credit score. 

You may be more likely to max out your card if you carry a balance since you’re adding charges on top of the balance you already have, which also affects your utilization — all the more reason to pay your bills in full every month.

“If [your card is declined] because of your credit limit, that means it’s time to assess what you’re buying and take stock of your finances — what you’re earning versus what you’re spending —  to see if there’s a mismatch there,” says N’Jie-Konte.

2. Fraudulent Purchases

Credit card companies can usually detect fraudulent purchases made on your card before you can. If you attempt to use your card at an unusual location or make a larger-than-usual purchase, that can trigger the issuer’s fraud detection and block the transaction. 

Sometimes a purchase you make looks like fraud, but it’s not. If that’s ever the case, you can usually clear it up with your credit card company through a text alert or a quick phone call. This can be inconvenient when there’s no real threat, but it also protects you from actual fraud attempts. Most issuers give you the option to sign up for text or email alerts to notify you of suspicious activity on your account.

“I get alerts on my credit card because I’ve been a victim of identity theft,” says Sokunbi. “Typically, I’ll get a text message saying the transaction was declined and asking whether I attempted that transaction, and I’ll say yes or no.”

In the event a fraudulent purchase goes through, all major credit card issuers offer zero fraud liability, which means you won’t be responsible for any unauthorized purchases made on your account. That’s why it’s generally safer to use your credit card for purchases than a debit card — banks will often have a zero liability policy for money stolen directly from your checking account, but it could take much longer to recover. 

3. An Expired Card

If you’re trying to use an expired card to make a purchase, it’ll be declined. A credit card’s expiration date is typically on the front or back of the card and has the month and year listed. 

Your card issuer will usually remind you when your card is approaching its expiration date and send you a new one before the old one expires, so check your card’s expiration and be on the lookout for an email or mailed letter from your issuer. If you notice your card is expiring soon, you may need to be proactive and reach out to your issuer. 

4. You’re Traveling

If you’re traveling in a different state, city, or country, making purchases with your credit card could raise a red flag with your issuer. Banks and card issuers typically see transactions in different locations over a short period as a sign that your card may have been stolen. 

In response, your issuer may freeze your account and prevent any purchases from going through to protect your information. If this happens while you’re traveling you can call your issuer to let them know the purchases are valid, but the best way to avoid any confusion is by informing your issuer ahead of your travel plans.

5. Missed Payments

If you’ve fallen behind on your credit card payments, your issuer may restrict your ability to use the card. In that case, the best thing to do is call the issuer and explain your situation. They can give you a clear idea of what you need to do to bring the account current.

Keep in mind that late or missed payments usually mean late fees — and potentially a penalty APR. If you’re missing payments because you’re going through a financial hardship, talk to your issuer to see what your options are. You may qualify for a modified payment plan that allows you to continue using the account while you catch up. 

How to Prevent Your Card From Getting Declined

While there are plenty of reasons your card may be declined, many of them are preventable if you proactively manage your credit accounts. Sokunbi says it comes down to paying attention to all the activity on your credit card, and reaching out to your issuer immediately if there is an issue or you see something suspicious. 

Here are a few things you can do to avoid a declined card in the future:

• Stay below your credit limit: Avoid both a declined card and a blow to your credit score by making sure you don’t max out your card. Monitor your spending regularly so you don’t let your balances get close to your credit limit.
• Sign up for account alerts: Many issuers give you the option to sign up for text or email alerts that notify you of suspicious activity, so you can avoid using your card if there’s been attempted fraud. You can also sign up for balance and spending notifications.
• Pay your balance on time and in full every month: Practicing good credit habits will lower the chances of your card getting declined for late payments or going over the limit, and help improve your credit score.
• Be aware of the card’s expiration date: Credit cards usually expire after a few years. If your card is close to expiration, reach out to your issuer to replace it with a new card.
• Notify your issuer of your travel plans in advance: A preemptive call to your issuer will make it easier for you to make purchases while you’re traveling, both within the U.S. and abroad. 

Bottom Line

You can’t guarantee that your card won’t ever be declined, but there are ways to reduce the chances of it happening. Keep your spending well below your credit limit, pay off your balance every month, and always notify your issuer of upcoming travel plans. The key is to take small steps toward actively managing your card account and being proactive with communicating with your issuer.