Essential Facts About Credit Card Processing Floor Limits

Floor limit is the threshold above which all credit card payments must receive an authorization approval from the issuer before being processed. Floor limits vary from one card acceptor to another and are specified in the credit card processing agreement.

E-commerce and MO / TO businesses, as well as all others accepting credit card payments in a non-face-to-face setting, have a zero floor limit, which means that all of their transactions must be authorized, whatever the payment amount. All card-present transactions, including payments at cardholder-activated terminals (CATs), like the ones at your gas, bus or train stations, typically have a floor limit.

So if a convenience store's floor limit is $50.00, all purchases of $49.99 or less will not have to be authorized, while transactions of $50.00 or more will need to obtain one. Transaction authorization is the process through which the issuer of the card approves or declines a transaction, after comparing the provided information to what it has on file for its cardholder.

In a card-present setting, the authorization is requested automatically after the cardholder swipes his card through the store's point-of-sale (POS) machine. In a card-not-present environment, the authorization is again requested automatically, after the card account's information is provided on a website or over the telephone. Either way, once the transaction information is submitted, it is sent to the card issuer via Visa's or MasterCard's payment systems and then the issuer's decision is sent back to the merchant through the same channel.

There was a time when floor limits had a much bigger importance than they have today. Years ago the card acceptor had to request an authorization approval for any transaction amount that was over a pre-defined level. Back then credit card processing involved the taking of a physical imprint of the card and the authorization process required a personal review of the transaction, which made the process both time consuming and expensive. Today card acceptors have at their disposal electronic authorization systems that make the process a very simple and inexpensive one. Once a transaction is authorized, the merchant gets an additional, and very powerful, protection against fraud.

Yet, even today, the concept of a floor limit gets discussed every now and again. For example, if a card acceptor is unable to connect to the credit card processing provider's authorization system, she will not be able to obtain an electronic authorization and will have no protection against fraud or a customer dispute, both of which can very easily deteriorate into a chargeback. At the same time, if the payment amount is lower than the floor limit, an authorization is not necessary. If, however, the amount exceeds the floor limit, the card acceptor must request an authorization approval for the transaction and should do this by making a telephone call to the processor's voice authorization center and obtaining a "voice authorization." You should only do that as a last resort, because voice authorizations circumvent the processor's system and leave you unprotected against chargebacks. If you have to do it, you should take the card's imprint on the transaction receipt.