diff --git a/assets/js/data/checkout/test/reducer.ts b/assets/js/data/checkout/test/reducer.ts
index 127fde0a649..97930369891 100644
--- a/assets/js/data/checkout/test/reducer.ts
+++ b/assets/js/data/checkout/test/reducer.ts
@@ -26,7 +26,6 @@ describe.only( 'Checkout Store Reducer', () => {
 		const expectedState = {
 			...defaultState,
 			redirectUrl: 'https://example.com',
-			status: STATUS.IDLE,
 		};
 
 		expect(
@@ -97,12 +96,15 @@ describe.only( 'Checkout Store Reducer', () => {
 	} );
 
 	it( 'should handle SET_HAS_ERROR when status is anything else', () => {
-		const initialState = { ...defaultState, status: STATUS.PRISTINE };
+		const initialState = {
+			...defaultState,
+			status: STATUS.AFTER_PROCESSING,
+		};
 
 		const expectedState = {
 			...defaultState,
 			hasError: false,
-			status: STATUS.IDLE,
+			status: STATUS.AFTER_PROCESSING,
 		};
 
 		expect(
@@ -135,7 +137,6 @@ describe.only( 'Checkout Store Reducer', () => {
 	it( 'should handle INCREMENT_CALCULATING', () => {
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			calculatingCount: 1,
 		};
 
@@ -152,7 +153,6 @@ describe.only( 'Checkout Store Reducer', () => {
 
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			calculatingCount: 0,
 		};
 
@@ -164,7 +164,6 @@ describe.only( 'Checkout Store Reducer', () => {
 	it( 'should handle SET_CUSTOMER_ID', () => {
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			customerId: 1,
 		};
 
@@ -176,7 +175,6 @@ describe.only( 'Checkout Store Reducer', () => {
 	it( 'should handle SET_USE_SHIPPING_AS_BILLING', () => {
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			useShippingAsBilling: false,
 		};
 
@@ -191,7 +189,6 @@ describe.only( 'Checkout Store Reducer', () => {
 	it( 'should handle SET_SHOULD_CREATE_ACCOUNT', () => {
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			shouldCreateAccount: true,
 		};
 
@@ -206,7 +203,6 @@ describe.only( 'Checkout Store Reducer', () => {
 	it( 'should handle SET_ORDER_NOTES', () => {
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			orderNotes: 'test',
 		};
 
@@ -221,7 +217,6 @@ describe.only( 'Checkout Store Reducer', () => {
 		};
 		const expectedState = {
 			...defaultState,
-			status: STATUS.IDLE,
 			extensionData: mockExtensionData,
 		};
 
diff --git a/assets/js/data/payment/thunks.ts b/assets/js/data/payment/thunks.ts
index 0b142271d81..3fd7bb57d5f 100644
--- a/assets/js/data/payment/thunks.ts
+++ b/assets/js/data/payment/thunks.ts
@@ -121,7 +121,7 @@ export const __internalEmitPaymentProcessingEvent: emitProcessingEventType = (
 			const { setBillingAddress, setShippingAddress } =
 				registry.dispatch( CART_STORE_KEY );
 
-			if ( successResponse ) {
+			if ( successResponse && ! errorResponse ) {
 				const { paymentMethodData } = successResponse?.meta || {};
 
 				if ( billingAddress && isBillingAddress( billingAddress ) ) {
@@ -135,6 +135,23 @@ export const __internalEmitPaymentProcessingEvent: emitProcessingEventType = (
 				}
 				dispatch.__internalSetPaymentMethodData( paymentMethodData );
 				dispatch.__internalSetPaymentReady();
+			} else if ( errorResponse && isFailResponse( errorResponse ) ) {
+				if ( errorResponse.message && errorResponse.message.length ) {
+					createErrorNotice( errorResponse.message, {
+						id: 'wc-payment-error',
+						isDismissible: false,
+						context:
+							errorResponse?.messageContext ||
+							noticeContexts.PAYMENTS,
+					} );
+				}
+
+				const { paymentMethodData } = errorResponse?.meta || {};
+				if ( billingAddress && isBillingAddress( billingAddress ) ) {
+					setBillingAddress( billingAddress );
+				}
+				dispatch.__internalSetPaymentError();
+				dispatch.__internalSetPaymentMethodData( paymentMethodData );
 			} else if ( errorResponse ) {
 				if ( errorResponse.message && errorResponse.message.length ) {
 					createErrorNotice( errorResponse.message, {