Credit Repair services

A floor limit is the payment amount above which credit or debit card transactions must be authorized before being processed. The floor limit can vary from business to business and is specified in the merchant processing agreement.

The term floor limit was coined, and had a lot more significance, in the past when on the sales floor the point-of-sale staff had to call for authorization on any payment amount that was over a predetermined level. Back then credit card processing involved taking a physical imprint of the card and the authorization process required a personal review, making the process both time consuming and expensive. Today merchants can benefit from electronic authorization systems that merchant banks provide at a very low cost. Once a payment is authorized, the merchant has an additional and powerful assurance against fraud.

Still, even today, the floor limit concept comes into play occasionally. For example, if unable to connect to the merchant bank’s authorization system, a merchant will not be able to obtain an electronic authorization and will have no recourse against fraudulent activity or a chargeback-generating customer dispute. Yet, if the transaction amount is less than the floor limit, no authorization is required by the merchant bank. If, however, the amount is over the floor limit, the merchant must authorize the transaction and can do this by making a telephone call to the merchant bank and obtaining a “voice authorization.” In this case the merchant will be well advised to also take the card’s imprint and place it on the sales receipt.

For merchants that operate in a card-not-present environment, the floor limit is always zero. This means that all of their transactions always require authorization, regardless of the payment amount. All internet, mail order and telephone order merchants fall into this category.

By: Joe Cole