Standard Floor Limit

What Is a Standard Floor Limit?

The term "standard floor limit" alludes to the transaction size past which merchants are required to get authorization while processing a credit card transaction. For instance, a merchant with a standard floor limit of $100 would have to approve any transaction for more than $100.

Due to the rise of high-speed electronic payment processing systems, standard floor limits are less noticeable than they were in the past as merchants can utilize these electronic systems to speak with banks straightforwardly for endorsement.

Understanding a Standard Floor Limit

The essential principle behind standard floor limits is to limit the risk of fraud or non-payment associated with every transaction. In theory, a merchant with no standard floor limits could find themselves helpless against critical losses in the event that they make large credit sales to their customers. To assist with moderating this risk, merchants arrange standard floor limits with their credit card processing companies, as per which all transactions at or over the designated level will be automatically authorized at the point of sale.

Standard floor limits can fluctuate as indicated by the type of credit card utilized by the customer. For instance, a merchant could have a similar floor limit for Visa (V) and MasterCard (MA) transactions, another floor limit for Discover (DFS) transactions, and a third floor limit for American Express (AXP) transactions. Hence, floor limits can some of the time be a determining factor in regards to the types of credit cards a merchant will acknowledge.

Standard Floor Limit Process

At the point when a transaction surpasses the merchant's standard floor limit, the terminal will hold the transaction while the salesperson contacts the credit card company for authorization to guarantee that the customer has adequate credit to complete the purchase.

For example, in the event that a customer endeavors to purchase $1,000 in 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 endorsement of the charge. Assuming the customer's charge is approved, the sale is completed. Assuming that it is denied, the merchant may cancel the sale.

By and large, merchants and customers would have to manually record their transactions utilizing manual credit card imprinters. These heavy gadgets, informally known as knuckle-busters, would utilize carbon paper to make a physical copy of the information embossed on the customer's credit card. The merchant, thus, would have to keep track of these carbon duplicates and use them to carefully reconcile their transaction records. As a result of this work escalated process, it would frequently require days or even a long time to determine whether a fraudulent transaction happened.

Electronic Payment Systems and Standard Floor Limits

Mechanical upgrades have since drastically further developed the endorsement cycle. Today, merchants utilize electronic point of sale (POS) terminals to handle credit card transactions, generating both digital records and printed receipts automatically. These POS terminals might actually discuss straightforwardly with the customer's bank and credit card issuer to determine whether the customer has adequate funds to complete the transaction. Considering this, standard floor limits are less important than they used to be since credit card transactions can now be authorized electronically promptly after making a purchase.

As terminals with advanced authentication innovations like micro processors, [PINs](/individual ID number), and magnetic stripes have been conveyed all the more widely in the marketplace, merchants running face to face transactions will quite often demand substantially less time validating credit card transactions. Then again, transactions that are not up close and personal, like telephone sales or Internet transactions, are much of the time subject to a zero-floor limit. That means that all such transactions require authorization before being approved, paying little heed to how big or small they are. Endorsement in this example, be that as it may, can be achieved rapidly.

Highlights

• Today, transaction authorizations happen automatically utilizing electronic payment systems, making standard floor limits less important than they were before.
• Any credit card sale over a standard floor limit requires endorsement from the credit card company.
• Standard floor limits are measures put in place to reduce risk by staying away from credit card fraud.
• A standard floor limit is a merchant's permitted limit to endorse credit card transactions.
• Most online transactions have a zero-floor limit, implying that all transactions require authorization, paying little heed to how big or small they are.