Standard Floor Limit

A Standard Floor Limit is the maximum amount a merchant can automatically charge to a customer’s credit card without getting an authorization on the purchase.

A Standard Floor Limit is the threshold set on a merchant’s credit card processing account which determines the maximum amount of money that merchant can charge a customer without getting an authorization on that purchase.

Sometimes referred to merely as a floor limit, this amount is contracted by the merchant and their credit card processing company. The floor limit can vary on the same merchant according to the type of card used by the customer. For instance, a merchant account may have the same floor limit for Visa and MasterCard transactions, another floor limit for Discover transactions, and a third floor limit for American Express transactions. Floor limits can sometimes be a determining factor regarding the types of credit cards a merchant will accept.

Widespread deployment of high-speed internet, electronic point-of-sale terminals and other forms of sales integration have shifted the landscape of merchant credit card sales in recent years. However, from the early days of credit card transactions, authorizations were standard operating procedure for processing credit card transactions. In the days when manual card imprinters were the standard for initiating credit card transactions, all merchant charges required authorization through the credit card companies. This was a time-consuming, laborious process, and in many ways left both merchants and credit card companies vulnerable to risk.

As electronic terminals became more widespread during the 1980’s and transaction times began to speed up, credit card companies began set standard floor limits on merchant accounts, permitting businesses to process payments more quickly and reducing risk to both the merchant and the credit card company.

When a transaction exceeds the merchant’s standard floor limit, the terminal will hold the transaction while the salesperson contacts the credit card company for an authorization to ensure that the customer has sufficient credit to complete the purchase. For instance, if a customer attempts to purchase $1000 worth of goods in a single transaction from a merchant with a $500 standard floor limit, the credit card company will require contact with the merchant for approval of the charge. If the customer’s charge is approved, the sale is completed. If it is denied, the merchant may cancel the sale.

As terminals with advanced authentication technologies such as microchips, PINs and magnetic strips have been deployed more widely in the marketplace, merchants running in-person transactions tend to require much less time authenticating credit card transactions. On the other hand, transactions which are not face-to-face, such as telephone sales or Internet transactions, are often subject to a zero floor limit, meaning that all such transactions require authorization before being approved.