Credit Card Processing Floor Limit
Floor limit is the amount above which credit 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. All card transactions conducted in a non-face-to-face environment have a zero floor limit, which means that all of them must be authorized, regardless of the amount. Non-face-to-face transactions include e-commerce and MO / TO (mail order and telephone order) payments and refunds, but exclude transactions at cardholder-activated terminals (CATs), like the ones at gas or train stations, which are considered face-to-face, even though the merchant is not physically present to accept the card.
For example, if a store’s floor limit is $25.00, every purchase of $24.99 or less would not have to be authorized, while transactions of $25.00 or more would require authorization. Authorization is the process by which a card issuer approves or declines a transaction. In a face-to-face environment, the authorization occurs automatically when the cardholder swipes her card through the merchant’s point-of-sale (POS) terminal. In a non-face-to-face setting, the authorization occurs when the card account’s information is submitted online or over the phone. In both instances, once the card information is provided, it is routed to the card issuer through Visa’s or MasterCard’s network and then the card issuer’s response is routed back through the same channel, approving or declining the transaction.
Floor limits carried a much greater importance in the past when the merchant had to call for an authorization on any payment amount that was over a predetermined level. Back then payment 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 payment processors 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 payment processor’s authorization system, a merchant will not be able to obtain an electronic authorization and will have no recourse against fraudulent activity or a customer dispute that will potentially lead to a chargeback. Yet, if the transaction amount is less than the floor limit, no authorization is required by the payment processor. 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 payment processor 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. Voice authorizations should be used only as a last resort, as they bypass the processing bank’s systems and cannot be used as supporting evidence in chargeback re-presentments. You should avoid key-entering voice-authorized transactions.
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May 22nd, 2010 at 5:00 pm
[...] transaction amount is below the merchant’s floor limit, and the cardholder adds a tip in an amount less than or equal to 20 percent of the transaction [...]
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May 27th, 2010 at 7:13 pm
[...] all transactions. The floor limit in e-commerce transactions is always zero, which means that all transactions must be authorized. An [...]
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May 28th, 2010 at 5:15 pm
[...] number, and follow its normal authorization procedures. The “pre-authorized order” floor limit of $50 does not [...]
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May 31st, 2010 at 3:38 pm
[...] floor limit for all transactions at self-service terminals is zero, which means that all transactions must be [...]
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May 31st, 2010 at 4:58 pm
[...] air-to-ground during the transaction or authorized in a delayed batch. All are authorized on a zero floor limit [...]
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June 1st, 2010 at 6:47 pm
[...] transactions, regardless of the amount, must be authorized on a zero floor limit basis with full, unaltered card-read data [...]
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June 4th, 2010 at 6:05 pm
[...] must be obtained for the total amount of the transaction if it exceeds the merchant’s floor limit. The merchant must note on the sales receipts the words “deposit” or [...]
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June 7th, 2010 at 5:31 pm
[...] authorization. All card-not-present transactions have a floor limit of zero, which means that they all require authorization. Always obtain authorization before [...]
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June 17th, 2010 at 8:16 pm
[...] transaction amount exceeds your floor limit or the floor limit applicable to the [...]
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July 1st, 2010 at 10:06 am
[...] authorization. You should always obtain authorization for transaction amounts that exceed your floor limit and never force them through if you receive a decline. Today authorization requests are sent out [...]
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July 2nd, 2010 at 9:50 am
[...] and chargebacks. Merchants are required to authorize all card transactions for amounts above their floor limit. Floor limits can vary from business to business and are usually specified in the merchant [...]
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July 18th, 2010 at 1:28 pm
[...] is the process by which a card issuer approves or declines a payment card transaction. The floor limit for all card-not-present transactions is zero, which means that you should request an authorization [...]
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July 20th, 2010 at 9:25 am
[...] card issuer receives a transaction that is below the merchant’s floor limit [...]
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July 22nd, 2010 at 7:41 am
[...] obtain authorization. You should always obtain authorization for transactions that exceed your floor limit and technology has made this easier. Today authorization requests are sent out automatically by [...]
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August 3rd, 2010 at 9:38 am
[...] designate chargebacks resulting from processing transactions, which were above the merchant’s floor limit, but authorization was not obtained. MasterCard does not have a reason code that exactly matches [...]
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August 10th, 2010 at 9:33 am
[...] floor limit. Discover’s floor limit is zero, which means that you have to request authorizations for all card transactions. If you [...]
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August 11th, 2010 at 9:42 am
[...] should call Discover’s authorization center for a voice authorization. Be advised that the floor limit for all Discover transactions is zero, which means that they all must be authorized. Transactions [...]