A floor limit or credit floor is the maximum transaction amount that a merchant can accept without requesting authorisation from the cardholder’s issuing bank. Transactions that fall below this limit may be accepted without obtaining authorisation while transactions above this limit require approval before they can be completed.
For example, if a merchant’s floor limit is $30, a $20 transaction may get approved automatically but a $100 purchase may need to go through the authorisation process to ensure that funds are available and the card is not stolen.
Processing a transaction over the limit without authorisation could result in a chargeback.
NOTE
The original intention of floor limits was to let merchants quickly process inexpensive, low-risk transactions at a time when real-time authorisation was slow, expensive, or impossible.
Today, authorisation is a much more streamlined, cost-effective process. As a result, most merchants operate with a zero floor limit, meaning authorisation is obtained for virtually every transaction.
If a floor limit is implemented, it is only applicable to card-present transactions.
All card-not-present (CNP) transactions — those made via mail, phone, mobile app, or online — do not have a floor limit.
Even though they aren’t commonly used in modern payment processing strategies, Visa still maintains a chargeback reason code related to floor limits.
In the past, merchants typically negotiated the floor limit with their acquiring bank or processor as a way to bypass the manual process of obtaining an authorisation on every transaction. Today, obtaining authorisation on all transactions is common, so floor limits are generally universally applied based on regulations set by the card brands, acquirer, and terminal settings rather than negotiated individually for each merchant.
