Zero-Floor Limit

Zero-floor limit is a term that relates to authorization for transactions involving credit and debit cards. Floor limit refers to the limit above which credit or debit transactions require authorization. A retailer can only automatically process transactions up to the maximum set by the floor limit. When that limit is zero, all transactions require authorization, regardless of their size. Authorization is provided electronically through the debit or credit card's issuer.

A zero-floor limit is especially applicable in situations where the merchant does not have physical access to the customer's credit card, such as online and mail-order merchants. These situations are known as contactless transactions, because the retailer does not have any actual physical contact with the card or the cardholder. In such cases that do not involve face-to-face interaction with the customer using the card, the floor limit is always zero.

Getting approval for a transaction when there is a zero-floor limit requires a retail authorization system in which all of a merchant's credit or debit transactions must be checked against the card's outstanding balance due. Card companies or processing services must also check any Warning Bulletin listings about past-due or over-limit accounts before allowing the transaction to proceed. While this adds one or more extra steps to the process, it helps prevent the possibility that a customer’s card could be used fraudulently, which could cause them considerable inconvenience.

If a retailer allows a zero-floor limit transaction to be processed without the proper authorization, they take a risk that the charge will later be declined or reversed. The retailer may also incur fees or penalties assessed by the credit card company.

Stores and retailers can establish their own individual floor limit for in-person transactions, but credit card companies also have their own rules, particularly for those transactions where the card is not present, such as online orders.

Credit card companies have recently been increasing their efforts to require and enforce authorizations and implement zero-floor limits to help prevent fraud. Credit card companies have experienced fraudulent activity on customers’ lost or stolen cards weeks or months after the cards were deactivated, because the transactions were of amounts smaller than the retailer’s floor limit. Implementing a zero-floor limit for all transactions of a certain type, such as those for online purchases, can help detect and prevent this fraudulent or suspicious activity.