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A card transaction may be declined for several reasons. Karat maintains fraud and risk monitoring systems designed to protect your account, and certain transactions may be blocked if they are flagged for review. If your transaction was declined, review the following common causes.

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1. Fraud or risk monitoring

Karat uses automated fraud and risk detection systems to monitor activity. If a transaction appears unusual based on location, merchant type, transaction size, or recent account activity, it may be declined to protect your account. If a transaction is flagged for potential fraud, you may receive a notification prompting you to review the activity.

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2. Card status

Confirm that your card is active in your dashboard. Transactions will be declined if the card is frozen or canceled. You can check this under: Banking or Charge Card > Cards If Karat’s fraud detection flags a purchase on your Banking Card, Karat may freeze the card and ask you to verify the purchase. The card shows a Needs verification label, and the Unfreeze action is disabled until you answer. See Verify a suspicious purchase below.

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3. Insufficient funds (Banking Card)

For Banking Cards, transactions are limited to the available balance in your checking account. If the transaction would result in a negative balance, it will be declined.

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4. Limit restrictions

Transactions may be declined if they exceed:
  • Your daily card limit (for the Banking Card)
  • Merchant-specific controls
  • Your organization’s approved spending limit (for the Karat Card)
You can review card limits from the Cards dashboard.

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5. International or restricted merchants

Some international transactions, merchant categories, or high-risk industries may be restricted depending on account settings.

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6. 3D Secure verification not completed

For certain online purchases, the merchant may require 3D Secure verification. If the verification code is not entered, or it expires before you complete the purchase, the transaction is declined. Try the purchase again and enter the one-time code when prompted.

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Verify a suspicious purchase

When Karat flags a purchase on your Banking Card as suspicious, Karat freezes the card and asks you to confirm whether you made the purchase. Only the cardholder can answer. This feature is rolling out gradually, so it may not be available for your organization yet.

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Answer by text

Karat sends a text to the phone number on file for the cardholder. The text includes the amount, the merchant, and the last 4 digits of the card.
  • Reply YES if you made the purchase.
  • Reply NO if you didn’t make the purchase.
If more than one of your cards is waiting for an answer, Karat asks you to include the card’s last 4 digits in your reply:
Karat only accepts replies from the phone number currently on file for the cardholder.

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Answer in the dashboard

You can answer in the dashboard even if you didn’t receive a text.
  1. Log in to your Karat dashboard. A prompt shows the purchase amount, merchant, card’s last 4 digits, and the time of the purchase.
  2. Select Yes, it was me or No, cancel this card.
If you close the prompt, a banner on the Banking page stays visible. Select Verify purchase in the banner to open the prompt again.

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Answer in the mobile app

When you open the Karat mobile app, a prompt asks Did you make this purchase? If you close it, a Verify a purchase to use your card banner stays on the card’s detail screen. Tap Verify purchase to reopen it. While the request is open, you can’t cancel the card from the app.
  1. Tap Yes, it was me or No, it wasn’t me.
  2. If you tap No, it wasn’t me, the app asks you to confirm. It shows whether you’ll get a new virtual card right away or a new physical card by mail.
  3. For a physical card, check the mailing address shown. Tap My address is outdated to update it, or Add mailing address if none is on file.
  4. Tap Confirm and replace my card. If you tap Nevermind, keep my card instead, Karat unfreezes the card and doesn’t cancel it.

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What happens after you answer

  • Yes: Karat unfreezes your card. Try the purchase again.
  • No: Karat cancels the card and issues a replacement. A replacement virtual card is ready right away on your Cards page. If you confirm in the mobile app and Karat mails a physical card, it goes to your mailing address. If Karat can’t issue a new card automatically, contact Concierge.
If Karat records your answer but can’t finish the last step, your card stays frozen. Reply again in a few minutes, or select Try again in the dashboard or mobile app. You can also contact our concierge team to record an answer for you.

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Still seeing declines?

If you are unsure why your transaction was declined, contact us so we can review your account activity directly. Karat is a fintech company, not an FDIC-insured bank. Banking and Card services provided by Grasshopper Bank, N.A., First Internet Bank of Indiana, and Cross River Bank, Members FDIC.